IDEAS home Printed from https://ideas.repec.org/a/bla/ecinqu/v56y2018i3p1827-1845.html
   My bibliography  Save this article

Asymmetries In The Responses Of Regional Job Flows To Oil Price Shocks

Author

Listed:
  • Mohamad B. Karaki

Abstract

This paper studies the effect of oil price innovations on manufacturing job flows across U.S. states. First, I estimate a nonlinear structural equation model and compute impulse response functions by Monte Carlo integration. I find asymmetries in the responses of job flows to positive and negative oil price innovations. Yet, these asymmetries do not pass a test of symmetry on the impulse responses, especially after accounting for data mining. Third, I use a test for the absence of job reallocation to evaluate whether an unexpected increase in the real price of oil price triggers an important change in job reallocation. I find that oil price shocks have limited regional allocative effects. (JEL E24, E32, Q43)

Suggested Citation

  • Mohamad B. Karaki, 2018. "Asymmetries In The Responses Of Regional Job Flows To Oil Price Shocks," Economic Inquiry, Western Economic Association International, vol. 56(3), pages 1827-1845, July.
    • Handle: RePEc:bla:ecinqu:v:56:y:2018:i:3:p:1827-1845
    DOI: 10.1111/ecin.12502
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/ecin.12502
    Download Restriction: no
    File URL: https://libkey.io/10.1111/ecin.12502?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Hamilton, James D., 1996. "This is what happened to the oil price-macroeconomy relationship," Journal of Monetary Economics, Elsevier, vol. 38(2), pages 215-220, October.
    2. Christiane Baumeister & Lutz Kilian, 2016. "Lower Oil Prices and the U.S. Economy: Is This Time Different?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 47(2 (Fall)), pages 287-357.
    3. Hamilton, James D., 2011. "Nonlinearities And The Macroeconomic Effects Of Oil Prices," Macroeconomic Dynamics, Cambridge University Press, vol. 15(S3), pages 364-378, November.
    4. Kilian, Lutz & Baumeister, Christiane & Zhou, Xiaoqing, 2013. "Are Product Spreads Useful for Forecasting? An Empirical Evaluation of the Verleger Hypothesis," CEPR Discussion Papers 9572, C.E.P.R. Discussion Papers.
    5. Lutz Kilian & Robert J. Vigfusson, 2011. "Are the responses of the U.S. economy asymmetric in energy price increases and decreases?," Quantitative Economics, Econometric Society, vol. 2(3), pages 419-453, November.
    6. Alejandro Cuñat & Marc J. Melitz, 2012. "Volatility, Labor Market Flexibility, And The Pattern Of Comparative Advantage," Journal of the European Economic Association, European Economic Association, vol. 10(2), pages 225-254, April.
    7. Hooker, Mark A., 1996. "What happened to the oil price-macroeconomy relationship?," Journal of Monetary Economics, Elsevier, vol. 38(2), pages 195-213, October.
    8. Lutz Kilian, 2014. "Oil Price Shocks: Causes and Consequences," Annual Review of Resource Economics, Annual Reviews, vol. 6(1), pages 133-154, October.
    9. Hamilton, James D., 2003. "What is an oil shock?," Journal of Econometrics, Elsevier, vol. 113(2), pages 363-398, April.
    10. Loungani, Prakash, 1986. "Oil Price Shocks and the Dispersion Hypothesis," The Review of Economics and Statistics, MIT Press, vol. 68(3), pages 536-539, August.
    11. Ben S. Bernanke, 1983. "Irreversibility, Uncertainty, and Cyclical Investment," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 98(1), pages 85-106.
    12. Herrera, Ana María & Lagalo, Latika Gupta & Wada, Tatsuma, 2011. "Oil Price Shocks And Industrial Production: Is The Relationship Linear?," Macroeconomic Dynamics, Cambridge University Press, vol. 15(S3), pages 472-497, November.
    13. Lutz Kilian & Robert J. Vigfusson, 2017. "The Role of Oil Price Shocks in Causing U.S. Recessions," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 49(8), pages 1747-1776, December.
    14. James D. Hamilton & Michael T. Owyang, 2012. "The Propagation of Regional Recessions," The Review of Economics and Statistics, MIT Press, vol. 94(4), pages 935-947, November.
    15. Herrera, Ana María & Karaki, Mohamad B. & Rangaraju, Sandeep Kumar, 2017. "Where do jobs go when oil prices drop?," Energy Economics, Elsevier, vol. 64(C), pages 469-482.
    16. Kristie M. Engemann & Michael T. Owyang & Howard J. Wall, 2014. "Where Is An Oil Shock?," Journal of Regional Science, Wiley Blackwell, vol. 54(2), pages 169-185, March.
    17. Knut Anton Mork & Oystein Olsen & Hans Terje Mysen, 1994. "Macroeconomic Responses to Oil Price Increases and Decreases in Seven OECD Countries," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 19-36.
    18. Pindyck, Robert S, 1991. "Irreversibility, Uncertainty, and Investment," Journal of Economic Literature, American Economic Association, vol. 29(3), pages 1110-1148, September.
    19. Lutz Kilian & Clara Vega, 2011. "Do Energy Prices Respond to U.S. Macroeconomic News? A Test of the Hypothesis of Predetermined Energy Prices," The Review of Economics and Statistics, MIT Press, vol. 93(2), pages 660-671, May.
    20. 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.
    21. Hooker, Mark A., 1996. "This is what happened to the oil price-macroeconomy relationship: Reply," Journal of Monetary Economics, Elsevier, vol. 38(2), pages 221-222, October.
    22. Davis, Steven J, 1987. "Allocative Disturbances and Specific Capital in Real Business Cycle Theories," American Economic Review, American Economic Association, vol. 77(2), pages 326-332, May.
    23. Baumeister, Christiane & Kilian, Lutz & Zhou, Xiaoqing, 2018. "Are Product Spreads Useful For Forecasting Oil Prices? An Empirical Evaluation Of The Verleger Hypothesis," Macroeconomic Dynamics, Cambridge University Press, vol. 22(3), pages 562-580, April.
    24. Mohamad B. Karaki, 2018. "Oil Prices and State Unemployment Rates," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3).
    25. Davis, Steven J. & Haltiwanger, John, 2001. "Sectoral job creation and destruction responses to oil price changes," Journal of Monetary Economics, Elsevier, vol. 48(3), pages 465-512, December.
    26. Hamilton, James D, 1988. "A Neoclassical Model of Unemployment and the Business Cycle," Journal of Political Economy, University of Chicago Press, vol. 96(3), pages 593-617, June.
    27. 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.
    28. Cunado, Juncal & Perez de Gracia, Fernando, 2003. "Do oil price shocks matter? Evidence for some European countries," Energy Economics, Elsevier, vol. 25(2), pages 137-154, March.
    29. Rotemberg, Julio J & Woodford, Michael, 1996. "Imperfect Competition and the Effects of Energy Price Increases on Economic Activity," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 28(4), pages 550-577, November.
    30. Kiseok Lee & Shawn Ni & Ronald A. Ratti, 1995. "Oil Shocks and the Macroeconomy: The Role of Price Variability," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 39-56.
    31. Edelstein, Paul & Kilian, Lutz, 2009. "How sensitive are consumer expenditures to retail energy prices?," Journal of Monetary Economics, Elsevier, vol. 56(6), pages 766-779, September.
    32. Gallant, A Ronald & Rossi, Peter E & Tauchen, George, 1993. "Nonlinear Dynamic Structures," Econometrica, Econometric Society, vol. 61(4), pages 871-907, July.
    33. Herrera, Ana María & Karaki, Mohamad B., 2015. "The effects of oil price shocks on job reallocation," Journal of Economic Dynamics and Control, Elsevier, vol. 61(C), pages 95-113.
    34. Koop, Gary & Pesaran, M. Hashem & Potter, Simon M., 1996. "Impulse response analysis in nonlinear multivariate models," Journal of Econometrics, Elsevier, vol. 74(1), pages 119-147, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Wang, Kai-Hua & Liu, Lu & Li, Xin & Oana-Ramona, Lobonţ, 2022. "Do oil price shocks drive unemployment? Evidence from Russia and Canada," Energy, Elsevier, vol. 253(C).
    2. Guy Assaker & Wassim Shahin, 2022. "What Drives Faculty Publication Citations in the Business Field? Empirical Results from an AACSB Middle Eastern Institution," Publications, MDPI, vol. 10(4), pages 1-29, November.
    3. Michieka, Nyakundi M. & Graziano, Marcello & Musso, Marta & Fouquet, Roger, 2022. "Energy transitions and labor market patterns in the U.S. coal industry," Structural Change and Economic Dynamics, Elsevier, vol. 63(C), pages 501-514.
    4. Goktug Sahin & Nukhet Dogan & M. Hakan Berument, 2023. "The effects of two benchmarks on Russian crude oil prices," Economic Change and Restructuring, Springer, vol. 56(2), pages 733-748, April.
    5. Zeina Alsalman, 2023. "Oil price shocks and US unemployment: evidence from disentangling the duration of unemployment spells in the labor market," Empirical Economics, Springer, vol. 65(1), pages 479-511, July.
    6. Iman Cheratian & Mohammad Reza Farzanegan & Saleh Goltabar, 2019. "Oil Price Shocks and Unemployment Rate: New Evidence from the MENA Region," MAGKS Papers on Economics 201931, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    7. Diab, Sara & Karaki, Mohamad B., 2023. "Do increases in gasoline prices cause higher food prices?," Energy Economics, Elsevier, vol. 127(PB).
    8. Panagiotis Palaios & Evangelia Papapetrou, 2022. "Oil prices, labour market adjustment and dynamic quantile connectedness analysis: evidence from Greece during the crisis," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 11(1), pages 1-21, December.
    9. Zhang, Xi-Xi & Liu, Lu, 2020. "The time-varying causal relationship between oil price and unemployment: Evidence from the U.S. and China (EGY 118745)," Energy, Elsevier, vol. 212(C).
    10. Herrera, Ana María & Karaki, Mohamad B. & Rangaraju, Sandeep Kumar, 2019. "Oil price shocks and U.S. economic activity," Energy Policy, Elsevier, vol. 129(C), pages 89-99.
    11. Koirala, Niraj Prasad & Ma, Xiaohan, 2020. "Oil price uncertainty and U.S. employment growth," Energy Economics, Elsevier, vol. 91(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Herrera, Ana María & Karaki, Mohamad B. & Rangaraju, Sandeep Kumar, 2019. "Oil price shocks and U.S. economic activity," Energy Policy, Elsevier, vol. 129(C), pages 89-99.
    2. Knotek, Edward S. & Zaman, Saeed, 2021. "Asymmetric responses of consumer spending to energy prices: A threshold VAR approach," Energy Economics, Elsevier, vol. 95(C).
    3. Lang, Korbinian & Auer, Benjamin R., 2020. "The economic and financial properties of crude oil: A review," The North American Journal of Economics and Finance, Elsevier, vol. 52(C).
    4. Herrera, Ana María & Lagalo, Latika Gupta & Wada, Tatsuma, 2015. "Asymmetries in the response of economic activity to oil price increases and decreases?," Journal of International Money and Finance, Elsevier, vol. 50(C), pages 108-133.
    5. Ozge Kandemir Kocaaslan, 2021. "Are the responses of output and investment to oil price shocks asymmetric?: The case of an oil-importing small open economy," Empirical Economics, Springer, vol. 61(5), pages 2501-2516, November.
    6. Claudio Morana, 2013. "The Oil Price-Macroeconomy Relationship Since the Mid-1980s: A Global Perspective," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3).
    7. Rajesh H. Acharya & Anver C. Sadath, 2018. "Revisiting the relationship between oil price and macro economy: Evidence from India," ECONOMICS AND POLICY OF ENERGY AND THE ENVIRONMENT, FrancoAngeli Editore, vol. 2018(1), pages 173-190.
    8. James D. Hamilton, 2013. "Oil prices, exhaustible resources and economic growth," Chapters, in: Roger Fouquet (ed.), Handbook on Energy and Climate Change, chapter 1, pages 29-63, Edward Elgar Publishing.
    9. Borozan, Djula & Lolic Cipcic, Marina, 2022. "Asymmetric and nonlinear oil price pass-through to economic growth in Croatia: Do oil-related policy shocks matter?," Resources Policy, Elsevier, vol. 76(C).
    10. Aktham I. Maghyereh & Basil Awartani & Osama D. Sweidan, 2019. "Oil price uncertainty and real output growth: new evidence from selected oil-importing countries in the Middle East," Empirical Economics, Springer, vol. 56(5), pages 1601-1621, May.
    11. Bunce, Alan & Carrillo-Maldonado, Paul, 2023. "Asymmetric effect of the oil price in the ecuadorian economy," Energy Economics, Elsevier, vol. 124(C).
    12. Kilian, Lutz & Vigfusson, Robert J., 2009. "Pitfalls in Estimating Asymmetric Effects of Energy Price Shocks," CEPR Discussion Papers 7284, C.E.P.R. Discussion Papers.
    13. John Elder & Apostolos Serletis, 2010. "Oil Price Uncertainty," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 42(6), pages 1137-1159, September.
    14. Kilian, Lutz & Vigfusson, Robert J., 2011. "Nonlinearities In The Oil Price–Output Relationship," Macroeconomic Dynamics, Cambridge University Press, vol. 15(S3), pages 337-363, November.
    15. Herrera, Ana María & Karaki, Mohamad B., 2015. "The effects of oil price shocks on job reallocation," Journal of Economic Dynamics and Control, Elsevier, vol. 61(C), pages 95-113.
    16. Deheri, Abdhut & Ramachandran, M., 2023. "Does Indian economy asymmetrically respond to oil price shocks?," The Journal of Economic Asymmetries, Elsevier, vol. 27(C).
    17. Kandemir Kocaaslan, Ozge, 2019. "Oil price uncertainty and unemployment," Energy Economics, Elsevier, vol. 81(C), pages 577-583.
    18. Dong Kim, 2012. "What is an oil shock? Panel data evidence," Empirical Economics, Springer, vol. 43(1), pages 121-143, August.
    19. Lutz Kilian, 2008. "The Economic Effects of Energy Price Shocks," Journal of Economic Literature, American Economic Association, vol. 46(4), pages 871-909, December.

    More about this item

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:ecinqu:v:56:y:2018:i:3:p:1827-1845. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/weaaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.