ECONOMIC GROWTH, INFLATION AND OIL SHOCKS: ARE THE 1970s COMING BACK?

Maria Dolores Gadea (), Ana Gómez-Loscos and Antonio Montañés
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Maria Dolores Gadea: Applied Economics - Universidad de Zaragoza = University of Zaragoza [Saragossa University] = Université de Saragosse

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Abstract: This paper analyses the relationship between oil price shocks and the macroeconomic evolution of the G7 countries. Using the Qu and Perron (2007) methodology, we endogenously identify three breaks in the non-linear relationship across our 1970-2008 sample. We compute long-term multipliers and find that the response of output and inflation to oil price shocks is greatest in the 1970s and progressively disappears until the late 1990s. In contrast to the previous literature, we observe that both effects reappear in the 2000s, especially on inflation. Nevertheless, the transmission of oil price shocks to the economy is weaker than in the 1970s, which means that oil price shocks have lost some of their explanatory power. Precisely identifying these effects is crucial for the design of adequate economic measures to control or smoothen them.

Keywords: Social; Sciences; &; Humanities (search for similar items in EconPapers)
Date: 2011-07-25
Note: View the original document on HAL open archive server: https://hal.science/hal-00720578v1
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Published in Applied Economics, 2011, 44 (35), pp.4585-4599. ⟨10.1080/00036846.2011.591741⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-00720578

DOI: 10.1080/00036846.2011.591741

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