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How energy prices shape OECD economic growth: Panel evidence from multiple decades

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  • Huntington, Hillard
  • Liddle, Brantley

Abstract

New fears about escalating fuel prices and accumulating inflation are raising concerns about the possible dimming of near-term prospects for world economic growth. The role of energy prices in shaping economic growth relates not only to geopolitical risks or environmental taxes but also to a range of strategies that place moratoria on primary energy sources like nuclear, coal, petroleum, and natural gas. Applying a new data set for country-level energy prices since 1960, this study evaluates the effects of energy prices on economic growth in 18 OECD countries by controlling for other important macroeconomic conditions that shape economic activity. Mean-group estimates that control for cross-country correlations are used to emphasize average responses across nations. Averaged across all nations, results suggest that a 10% increase in energy prices dampened economic growth by about 0.15%. Moreover, some evidence exists that this response may be larger for more energy-intensive economies.

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  • Huntington, Hillard & Liddle, Brantley, 2022. "How energy prices shape OECD economic growth: Panel evidence from multiple decades," Energy Economics, Elsevier, vol. 111(C).
    • Handle: RePEc:eee:eneeco:v:111:y:2022:i:c:s014098832200247x
    DOI: 10.1016/j.eneco.2022.106082
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    More about this item

    Keywords

    OECD economic growth; Energy prices; Cross-country panel analysis;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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