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Oil Matters: Real Input Prices and U.S. Unemployment Revisited

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  • Andreopoulos Spyros

    (Morgan Stanley & Co.)

Abstract

Motivated by structural instability in the energy price - macroeconomy nexus, this paper revisits Granger causality between unemployment and real input prices, the real prices of energy (crude oil) and capital (real interest rate). Time varying Granger causality is investigated through application of the Markov Switching Vector Autoregression of Psaradakis, Ravn, and Sola [Journal of Applied Econometrics, 20(5), 665-683 (2005)]. The results show that the real price of oil helps forecast unemployment in recessions only, while the real interest rate does so exclusively in expansions. This finding is consistent with the hypothesis that oil prices have asymmetric effects on the economy. A further result is that oil, but not the real rate, is economically significant for unemployment in the long run solution of the model.

Suggested Citation

  • Andreopoulos Spyros, 2009. "Oil Matters: Real Input Prices and U.S. Unemployment Revisited," The B.E. Journal of Macroeconomics, De Gruyter, vol. 9(1), pages 1-31, March.
    • Handle: RePEc:bpj:bejmac:v:9:y:2009:i:1:n:9
    DOI: 10.2202/1935-1690.1632
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    References listed on IDEAS

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    4. Sugra Ingilab Humbatova & Natig Qadim-Oglu Hajiyev, 2019. "Oil Factor in Economic Development," Energies, MDPI, vol. 12(8), pages 1-40, April.
    5. Alom, Fardous, 2011. "Economic Effects of Oil and Food Price Shocks in Asia and Pacific Countries: An Application of SVAR Model," 2011 Conference, August 25-26, 2011, Nelson, New Zealand 115346, New Zealand Agricultural and Resource Economics Society.
    6. Kocaarslan, Baris & Soytas, Mehmet Ali & Soytas, Ugur, 2020. "The asymmetric impact of oil prices, interest rates and oil price uncertainty on unemployment in the US," Energy Economics, Elsevier, vol. 86(C).
    7. Cuestas, Juan Carlos & Ordóñez, Javier, 2018. "Oil prices and unemployment in the UK before and after the crisis: A Bayesian VAR approach. A note," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 510(C), pages 200-207.
    8. Iman Cheratian & Mohammad Reza Farzanegan & Saleh Goltabar, 2019. "Oil Price Shocks and Unemployment Rate: New Evidence from the MENA Region," MAGKS Papers on Economics 201931, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
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    10. María Isabel Rodríguez-Ferradas & José A. Alfaro-Tanco & Francesco Sandulli, 2016. "A framework for Open Innovation practices: Typology and characterisation," Faculty Working Papers 02/16, School of Economics and Business Administration, University of Navarra.
    11. Zhang, Xi-Xi & Liu, Lu, 2020. "The time-varying causal relationship between oil price and unemployment: Evidence from the U.S. and China (EGY 118745)," Energy, Elsevier, vol. 212(C).
    12. Cuestas, Juan Carlos & Gil-Alana, Luis A., 2018. "Oil price shocks and unemployment in Central and Eastern Europe," Economic Systems, Elsevier, vol. 42(1), pages 164-173.
    13. Ahmed, M. Iqbal & Farah, Quazi Fidia & Kishan, Ruby P., 2023. "Oil price uncertainty and unemployment dynamics: Nonlinearities matter," Energy Economics, Elsevier, vol. 125(C).
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