How higher oil prices could affect euro area potential output

Julien Le Roux, Béla Szörfi and Marco Weißler

Economic Bulletin Boxes, 2022, vol. 5

Abstract: Oil prices spiked in the immediate aftermath of Russia’s invasion of Ukraine and have been volatile ever since. As the current increase in oil prices mainly reflects supply-side factors, it could also affect potential output. This box uses several approaches to assess the channels through which oil price hikes have an impact on potential output and to estimate the possible magnitude of the impact of the current shock. The quantitative estimates proposed should be regarded with caution given the current volatility in the price of a barrel of Brent crude oil and the uncertainty surrounding the amplitude of the shock, which will depend on how the conflict develops. JEL Classification: E22, E31, E32, Q41

Keywords: oil prices; Potential output; supply side (search for similar items in EconPapers)
Date: 2022-08
Note: 3182505
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