How much did oil market developments contribute to the 2009 recession in Germany?

Kai Carstensen, Steffen Elstner () and Georg Paula

Munich Reprints in Economics from University of Munich, Department of Economics

Abstract: In this paper, we use a structural vector autoregressive model to study the effects of oil market developments on the German economy. We find that higher oil prices are always associated with a decline in private consumption expenditures, but the response of gross domestic product (GDP) crucially depends on the underlying shock. While a disruption in oil supply provokes a recession, positive world demand shocks prompt a temporary increase in exports and investment, which initially outweigh the cutback on consumption. In a counterfactual analysis, we show that the world demand shocks that led to the 2007/2008 oil price rise triggered a delayed 0.8 percent decrease in German GDP in 2009, and therefore notably contributed to the recession of that year.

Date: 2013
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Citations: View citations in EconPapers (20)

Published in Scandinavian Journal of Economics 3 115(2013): pp. 695-721

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