Oil and the Macroeconomy Since the 1970s

Robert Barsky and Lutz Kilian

No 10855, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Increases in oil prices have been held responsible for recessions, periods of excessive inflation, reduced productivity and lower economic growth. In this paper, we review the arguments supporting such views. First, we highlight some of the conceptual difficulties in assigning a central role to oil price shocks in explaining macroeconomic fluctuations, and we trace how the arguments of proponents of the oil view have evolved in response to these difficulties. Second, we challenge the notion that at least the major oil price movements can be viewed as exogenous with respect to the US macroeconomy. We examine critically the evidence that has led many economists to ascribe a central role to exogenous political events in modeling the oil market, and we provide arguments in favor of 'reverse causality' from macroeconomic variables to oil prices. Third, although none of the more recent oil price shocks has been associated with stagflation in the US economy, a major reason for the continued popularity of the oil shock hypothesis has been the perception that only oil price shocks are able to explain the US stagflation of the 1970s. We show that this is not the case.

JEL-codes: E31 E32 (search for similar items in EconPapers)
Date: 2004-10
New Economics Papers: this item is included in nep-mac
Note: EFG
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (680)

Published as Barsky, Robert B. and Lutz Kilian. "Oil and The Macroeconomy Since The 1970s," Journal of Economic Perspectives, 2004, v18(4,Fall), 115-134.

Downloads: (external link)
http://www.nber.org/papers/w10855.pdf (application/pdf)

Related works:
Journal Article: Oil and the Macroeconomy Since the 1970s (2004)
Working Paper: Oil and the Macroeconomy Since the 1970s (2004)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:10855

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w10855

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().