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Oil Prices and Economic Activity: A Brief Update

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  • Jamie Emerson

    (Salisbury University)

Abstract

Using recent data, this paper investigates whether changes in oil prices have the expected effects on the US economy. Cointegration analysis and vector error correction models are employed in order to evaluate the impact of changing oil prices on US output and inflation. Further, impulse response analysis is performed to assess how shocks to oil prices affect the aggregate price level and aggregate economic activity. Our findings indicate, as expected, that regardless of the sample period considered, an oil price shock leads to higher inflation and lower industrial production in the US economy.

Suggested Citation

  • Jamie Emerson, 2010. "Oil Prices and Economic Activity: A Brief Update," Economics Bulletin, AccessEcon, vol. 30(2), pages 1411-1424.
    • Handle: RePEc:ebl:ecbull:eb-10-00128
    as

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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Cointegration; Vector Error Correction; Impulse Response; Oil Price Shocks;
    All these keywords.

    JEL classification:

    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy

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