Estimating the Quantitative Importance of Various Sources of Macroeconomic Variability

1994 ◽  
Vol 33 (4II) ◽  
pp. 1073-1087
Author(s):  
Rizwan Thair
Keyword(s):  
Research Agenda ◽  
Oil Price ◽  
Macroeconomic Fluctuations ◽  
Early 20Th Century ◽  
Technology Shocks ◽  
Money Stock ◽  
Price Shocks ◽  
The Business Cycle ◽  
Structural Shifts ◽  
Quantitative Importance

Providing a reasonable explanation for the business cycle has been the research agenda for many economists since the early 20th century, from Mitchell (1913), Pigou (1927) and Adelman and Adelman (1959) to Lucas (1972), Black (1982) and King and Plosser (1984). For a review, see Zarnowitz (1985). Most attempts to explain the sources of macroeconomic fluctuations' attribute the variability in output and prices to only a few sources, sometimes to\mJ.y one. Kydland and Prescott (1982) and others proposed technology shocks as the main source of aggregate variability; Barro (1977) pointed to unanticipated changes in money stock; Lilien (1982) argued for 'unusual structural shifts' such as changes in the demand for goods relative to services, and Hamilton (1983) concluded in favour of oil price shocks.

scholarly journals Oil and the Macroeconomy Since the 1970s

2004 ◽  
Vol 18 (4) ◽  
pp. 115-134 ◽  
Author(s):  
Robert B Barsky ◽  
Lutz Kilian
Keyword(s):  
Oil Prices ◽  
Oil Price ◽  
Macroeconomic Fluctuations ◽  
Oil Price Shocks ◽  
Reverse Causality ◽  
Price Shocks ◽  
Us Economy ◽  
Political Events ◽  
The Us ◽  
Oil Shock

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.

OIL PRICE SHOCKS, INFLATION, AND CHINESE MONETARY POLICY

2017 ◽  
Vol 23 (1) ◽  
pp. 1-28 ◽  
Author(s):  
Yunqing Wang ◽  
Qigui Zhu ◽  
Jun Wu
Keyword(s):  
Monetary Policy ◽  
Chinese Economy ◽  
Oil Price ◽  
New Keynesian ◽  
Oil Price Shocks ◽  
Price Shocks ◽  
Price Inflation ◽  
Core Inflation ◽  
Dynamic Stochastic ◽  
The Business Cycle

This paper proposes a New Keynesian dynamic stochastic general equilibrium model of the Chinese economy incorporating the demand of oil to study the effects of oil price shocks on the business cycle. The model answers several questions, including how monetary policy should respond to the disturbances from such shocks, and whether monetary authorities should use core inflation or headline inflation including oil price inflation as the monetary policy rule. The contributions could be summarized as follows: First, the model reveals that the oil transmission mechanism is determined by the nominal inertia, income effect, and the portfolio allocation effect. Second, both noncore inflation monetary policy and core inflation monetary policy that are simultaneously pegged to oil prices fluctuations are inferior to the monetary policy purely pegged to core inflation. Our findings suggest that the monetary policy should focus on core inflation instead of headline inflation.

Monetary policy and the effect of the transfer of oil prices to inflation

2020 ◽  
pp. 41-50
Author(s):  
Ph. S. Kartaev ◽  
I. D. Medvedev
Keyword(s):  
Monetary Policy ◽  
Inflation Targeting ◽  
Dynamic Models ◽  
Oil Prices ◽  
Oil Price ◽  
Oil Price Shocks ◽  
Negative Effects ◽  
Price Shocks ◽  
Policy Regime ◽  
The Impact

The paper examines the impact of oil price shocks on inflation, as well as the impact of the choice of the monetary policy regime on the strength of this influence. We used dynamic models on panel data for the countries of the world for the period from 2000 to 2017. It is shown that mainly the impact of changes in oil prices on inflation is carried out through the channel of exchange rate. The paper demonstrates the influence of the transition to inflation targeting on the nature of the relationship between oil price shocks and inflation. This effect is asymmetrical: during periods of rising oil prices, inflation targeting reduces the effect of the transfer of oil prices, limiting negative effects of shock. During periods of decline in oil prices, this monetary policy regime, in contrast, contributes to a stronger transfer, helping to reduce inflation.

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