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Oil Price Shocks and U.S. Economic Activity: An International Perspective

Nathan Balke (), Stephen Brown and Mine Yucel

Discussion Papers from Resources For the Future

Abstract: Oil price shocks are thought to have played a prominent role in U.S. economic activity. In this paper, we employ Bayesian methods with a dynamic stochastic general equilibrium model of world economic activity to identify the various sources of oil price shocks and economic fluctuation and to assess their effects on U.S. economic activity. We find that changes in oil prices are best understood as endogenous. Oil price shocks in the 1970s and early 1980s and the 2000s reflect differing mixes of shifts in oil supply and demand, and differing sources of oil price shocks have differing effects on economic activity. We also find that U.S. output fluctuations owe mostly to domestic shocks, with productivity shocks contributing to weakness in the 1970s and 1980s and strength in the 2000s.

Keywords: oil price; international business cycles; general equilibrium; Bayesian estimation (search for similar items in EconPapers)
JEL-codes: C3 E3 Q43 (search for similar items in EconPapers)
Date: 2010-07-23
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Working Paper: Oil price shocks and U.S. economic activity: an international perspective (2010) Downloads
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