Lutz Kilian, "The Economic Effects of Energy Price Shocks", University of Michigan and CEPR, October 28, 2007
http://www-personal.umich.edu/~lkilian/jel102807r1.pdfLarge fluctuations in energy prices have been a distinguishing characteristic of the U.S. economy since the 1970s. Turmoil in the Middle East, rising energy prices in the U.S. and evidence of global warming recently have reignited interest in the link between energy prices and economic performance. This paper addresses a number of the key issues in this debate: What are energy price shocks and where do they come from? How responsive is energy demand to changes in energy prices? How do consumers? expenditure patterns evolve in response to energy price shocks? How do energy price shocks affect real output, inflation, stock markets and the balance-of-payments? Why do energy price increases seem to cause recessions, but energy price decreases do not seem to cause expansions? Why has there been a surge in gasoline
prices in recent years? Why has this new energy price shock not caused a recession so far? Have the effects of energy price shocks waned since the 1980s and, if so, why?'
Olivier J. Blanchard and Jordi Gali, "The Macroeconomic Effects of Oil Shocks: Why are the 2000s So Different from the 1970s?" August 18, 2007
http://www.crei.cat/people/gali/pdf_files/bgoil07wp.pdfWe characterize the macroeconomic performance of a set of industrialized economies in the aftermath of the oil price shocks of the 1970s and of the last decade, focusing on the differences across episodes. We examine four different hypotheses for the mild effects on infation and economic activity of the recent increase in the price of oil: (a) good luck (i.e. lack of concurrent adverse shocks), (b) smaller share of oil in production, (c) more flexible labor markets, and (d) improvements in monetary policy. We conclude that all four have played an important role.
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