This article analyzes the macroeconomic impact of high oil prices on various national economies. Using an analytical model, we show that oil price-real gross domestic product (GDP) elasticity can be estimated roughly from current oil prices, GDP, and oil imports and exports. In contrast to large-scale modeling, our approach is based on simple algebra and clear assumptions, and thus provides policymakers with a more transparent view of the vulnerability of economies to oil price increases, in terms of GDP; our model shows how this vulnerability declined sharply in the late 1980s and remained low through the 1990s, and how the euro-zone countries are becoming more vulnerable while Japan remains less so.
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Article provided by M.E. Sharpe, Inc. in its journal Japanese Economy.
Volume (Year): 35 (2008) Issue (Month): 1 (April) Pages: 99-127 Download reference. The following formats are available: HTML
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