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INTRODUCTION TO OIL PRICE SHOCKS

Published online by Cambridge University Press:  30 December 2011

Apostolos Serletis  and
John Elder
Apostolos Serletis*
Affiliation:
University of Calgary
John Elder
Affiliation:
Colorado State University
*
Address correspondence to: Apostolos Serletis, Department of Economics, University of Calgary, Calgary, Alberta, T2N 1N4, Canada; e-mail: [email protected]; URL:http://econ.ucalgary.ca/serletis.htm.
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Extract

The relationship between the price of oil and the level of economic activity is a fundamental empirical issue in macroeconomics. Hamilton (1983) showed that oil prices had significant predictive content for real economic activity in the United States prior to 1972, whereas Hooker (1996) argued that the estimated linear relations between oil prices and economic activity appear much weaker after 1973. In the debate that followed, several authors suggested that the apparent weakening of the relationship between oil prices and economic activity is illusory, arguing that the true relationship between oil prices and real economic activity is asymmetric, with the correlation between oil price decreases and output significantly different from the correlation between oil price increases and output—see, for example, Mork (1989) and Hamilton (2003).

Type
Introduction
Information
Macroeconomic Dynamics , Volume 15 , Supplement S3: Oil Price Shocks , November 2011 , pp. 327 - 336
Copyright
Copyright © Cambridge University Press 2011

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