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Oil Shocks and the Business Cycle in Europe

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  • Baltasar Manzano
  • Carlos de Miguel
  • José Mô Martín Moreno

Abstract

This paper analyzes the effects of oil price shocks on the business cycle of the EU-15 countries using a standard dynamic general equilibrium model for a small open economy in which oil is included as an imported productive input. The results show that oil shocks can account for a significant percentage of GDP fluctuations in many of those countries. Furthermore, we show that the increases in the relative price of oil had a negative effect on welfare, particularly in southern European countries, which are historically associated with a lax monetary policy during oil crisis.

Suggested Citation

  • Baltasar Manzano & Carlos de Miguel & José Mô Martín Moreno, "undated". "Oil Shocks and the Business Cycle in Europe," Studies on the Spanish Economy 215, FEDEA.
    • Handle: RePEc:fda:fdaeee:215
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    References listed on IDEAS

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    1. Carlos de Miguel & Baltasar Manzano & Jose M. Martin-Moreno, 2003. "Oil Price Shocks and Aggregate Fluctuations," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 47-61.
    2. Robert S. Pindyck, 1979. "The Structure of World Energy Demand," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262661772, April.
    3. Olson, Mancur, 1988. "The Productivity Slowdown, the Oil Shocks, and the Real Cycle," Journal of Economic Perspectives, American Economic Association, vol. 2(4), pages 43-69, Fall.
    4. Finn, Mary G., 1995. "Variance properties of Solow's productivity residual and their cyclical implications," Journal of Economic Dynamics and Control, Elsevier, vol. 19(5-7), pages 1249-1281.
    5. Knut Anton Mork, 1994. "Business Cycles and the Oil Market," The Energy Journal, International Association for Energy Economics, vol. 0(Special I), pages 15-38.
    6. Kim, In-Moo & Loungani, Prakash, 1992. "The role of energy in real business cycle models," Journal of Monetary Economics, Elsevier, vol. 29(2), pages 173-189, April.
    7. Mork, Knut Anton, 1989. "Oil and Macroeconomy When Prices Go Up and Down: An Extension of Hamilton's Results," Journal of Political Economy, University of Chicago Press, vol. 97(3), pages 740-744, June.
    8. Hamilton, James D, 1983. "Oil and the Macroeconomy since World War II," Journal of Political Economy, University of Chicago Press, vol. 91(2), pages 228-248, April.
    9. Greenwood, Jeremy & Hercowitz, Zvi & Huffman, Gregory W, 1988. "Investment, Capacity Utilization, and the Real Business Cycle," American Economic Review, American Economic Association, vol. 78(3), pages 402-417, June.
    10. Mendoza, Enrique G, 1991. "Real Business Cycles in a Small Open Economy," American Economic Review, American Economic Association, vol. 81(4), pages 797-818, September.
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    Cited by:

    1. Jorge Blazquez & Jose Maria Martin-Moreno & Rafaela Perez & Jesus Ruiz, 2017. "Fossil Fuel Price Shocks and CO2 Emissions: The Case of Spain," The Energy Journal, International Association for Energy Economics, vol. 0(Number 6).
    2. Tarek Atallah & Jorge Blazquez, 2015. "Quantifying the impact of coal on global economic growth and energy productivity in the early 21st century," ECONOMICS AND POLICY OF ENERGY AND THE ENVIRONMENT, FrancoAngeli Editore, vol. 2015(2), pages 93-106.
    3. Amin Sakib & Marsiliani Laura, 2015. "Energy price shocks in dynamic stochastic general equilibrium: the case of Bangladesh," Review of Business and Economics Studies, CyberLeninka;Федеральное государственное образовательное бюджетное учреждение высшего профессионального образования «Финансовый университет при Правительстве Российской Федерации» (Финансовый университет), issue 4, pages 12-21.

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