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Oil Price Shocks and Economic Growth in the Us

Michael Alexeev () and Yao-Yu Chih ()
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Yao-Yu Chih: Texas State University

No 2017-011, CAEPR Working Papers from Center for Applied Economics and Policy Research, Department of Economics, Indiana University Bloomington

Abstract: We apply both conventional and spatial techniques to panel data for US states to examine the effects of plausibly exogenous oil price shocks on economic growth. Contrary to the oil curse claims, we find that oil price shocks have numerically moderate but highly statistically significant positive direct effects on growth while the indirect effects are insignificant. We also find that positive impact of oil occurs only in states with a high value of the economic freedom index. In a technical contribution to the spatial econometrics literature we propose a procedure for estimating marginal effects of oil price shocks in a model with interaction terms. In addition, we show that the cumulative direct oil price effects on economic growth are persistent over time.

Keywords: oil curse; regional economic growth; spatial lags (search for similar items in EconPapers)
JEL-codes: Q32 R11 C33 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ene, nep-geo, nep-gro and nep-ure
Date: 2017-10
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