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Oil Price Shocks, Unemployment, Investment and the Current Account: An Intertemporal Disequilibrium Analysis

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  • van Wijnbergen, Sweder

Abstract

We use an intertemporal model incorporating short-run labour and goods markets disequilibrium to analyse the consequences of oil price shocks for unemployment, investment and the current account. A dominant transfer element leads to Keynesian unemployment now and deterioration tomorrow in the final-goods terms of trade. A dominant supply-shock element leads to classical unemployment now and an improvement tomorrow in the final-goods terms of trade. Investment falls if there is classical unemployment but increases in the K-region under Putty-Clay technology. Current account deficits are larger in the K-region than in the C-region. If world interest rates fall, investment accelerates in the K-region but not in the C-region. We use these results to explain observed differences in response to oil shocks.

Suggested Citation

  • van Wijnbergen, Sweder, 1985. "Oil Price Shocks, Unemployment, Investment and the Current Account: An Intertemporal Disequilibrium Analysis," CEPR Discussion Papers 65, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:65
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    Cited by:

    1. Dogrul, H. Günsel & Soytas, Ugur, 2010. "Relationship between oil prices, interest rate, and unemployment: Evidence from an emerging market," Energy Economics, Elsevier, vol. 32(6), pages 1523-1528, November.
    2. Ben Salem, Leila & Nouira, Ridha & Saafi, Sami & Rault, Christophe, 2024. "How do oil prices affect the GDP and its components? New evidence from a time-varying threshold model," Energy Policy, Elsevier, vol. 190(C).
    3. Cong, Rong-Gang & Shen, Shaochuan, 2013. "Relationships among Energy Price Shocks, Stock Market, and the Macroeconomy: Evidence from China," MPRA Paper 112211, University Library of Munich, Germany.
    4. repec:zbw:bofrdp:1989_013 is not listed on IDEAS
    5. Everhart, Stephen & Duval-Hernandez, Robert, 2001. "Management of oil windfalls in Mexico : historical experience and policy options for the future," Policy Research Working Paper Series 2592, The World Bank.
    6. Mireille Assouline & Anne Epaulard & Patrick Fève & Marc Vielle, 1990. "Ralentissement de l'activité mondiale et crise du Golfe : quels ajustements pour l'économie française ?," Économie et Prévision, Programme National Persée, vol. 96(5), pages 33-44.
    7. Yugang He & Moongi Lee, 2022. "Macroeconomic Effects of Energy Price: New Insight from Korea?," Mathematics, MDPI, vol. 10(15), pages 1-14, July.
    8. Haaparanta, Pertti & Kontulainen, Jarmo, 1989. "Real exchange rate as an unobservable variable," Bank of Finland Research Discussion Papers 13/1989, Bank of Finland.
    9. Atems, Bebonchu & Kapper, Devin & Lam, Eddery, 2015. "Do exchange rates respond asymmetrically to shocks in the crude oil market?," Energy Economics, Elsevier, vol. 49(C), pages 227-238.
    10. Haaparanta, Pertti & Kontulainen, Jarmo, 1989. "Real exchange rate as an unobservable variable," Research Discussion Papers 13/1989, Bank of Finland.
    11. Marois, William, 1986. "Théorie du déséquilibre et politique économique en économie ouverte," L'Actualité Economique, Société Canadienne de Science Economique, vol. 62(2), pages 257-288, juin.
    12. LAOURARI, Imène & GASMI, Farid, 2016. "The impact of real oil revenues fluctuations on economic growth in Algeria: evidence from 1960-2015 data," MPRA Paper 77590, University Library of Munich, Germany.
    13. van der Ploeg, F., 1987. "Rationing in open economy and dynamic macroeconomics : A survey," Other publications TiSEM fd411b51-f487-4dde-a0e9-6, Tilburg University, School of Economics and Management.

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