Oil and the Macroeconomy Since the 1970s

Bibliographic Data

ID5149490
AuthorsRobert B Barsky (Professor of Economics, University of Michigan, Ann Arbor, Michigan, and Research Associate, National Bureau of Economic Research, Cambridge, Massachusetts.), Robert Barsky (National Bureau of Economic Research), Lutz Kilian (Associate Professor of Economics, University of Michigan, Ann Arbor, Michigan, and Research Fellow, Centre for Economic Policy Research, London, United Kingdom.)
Year2004
Volume18
Issue4
Pages115-134
Publication date2004-11-01
Peer ReviewedYes
Open AccessYes
TypeARTICLE
VenueThe Journal of Economic Perspectives (JOURNAL)
Journal identifiersISSN: 0895-3309 • E-ISSN: 1944-7965
PublisherAmerican Economic Association (PUBLISHER • US)
DOI10.1257/0895330042632708
OpenAlexW3121421445
LanguageEN
Citations received47
References cited16

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

Economics · Keynesian economics · Macroeconomics · Monetary economics · Monetary policy · Oil price · Popularity · Productivity · Recession · Stagflation · Global Energy and Sustainability Research · Market Dynamics and Volatility · Monetary Policy and Economic Impact

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