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Technology, Employment, and the Oil-Countries Business Cycle

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  • Rodolfo Mendez-Marcano
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    Abstract

    On the ground of the significance and potential dual-nature of oil price shocks- they may act simultaneously like pure technology and pure expenditure shocks- in the context of the oil-countries-net oil-exporters with a substantial share of oil-income on their total export an/or fiscal-income. The paper questions the validity in such context of Gal s (1999) influential methodology for evaluating- so far, negatively- the empirical merits of it aimed to restore such validity by disentangling oil-price shocks from the rest of shocks. The comparison of the results from the application of both methodologies to Norway, Mexico, Russia, Trinidad&Tobago and Venezuela, besides supporting the dual-nature hypothesis and the necessity of such disentangling, proves the latter to be instrumental to get results consistent with Gal s (1999). Additionally, the paper unveil some startling facts about the effects of oil price shocks in this context remarkably, the prevalence of their technological-nature when oil-income has a higher weight on export than on fiscal-income, and of their expenditure-nature otherwise and shed some light on the influence of institutional reform on such effects.

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    Paper provided by BBVA Bank, Economic Research Department in its series Working Papers with number 1405.

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    Length: 73 pages
    Date of creation: Feb 2014
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    Handle: RePEc:bbv:wpaper:1405

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    Keywords: SVAR; identifying restrictions; small open economies; oil economies; dutch disease; resource curse;

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    1. Galí, Jordi, 2002. "New Perspectives on Monetary Policy, Inflation and the Business Cycle," CEPR Discussion Papers 3210, C.E.P.R. Discussion Papers.
    2. Jon Faust & Eric M. Leeper, 1994. "When do long-run identifying restrictions give reliable results?," Working Paper 94-2, Federal Reserve Bank of Atlanta.
    3. Neville Francis & Michael T. Owyang & Athena T. Theodorou, 2003. "The use of long-run restrictions for the identification of technology shocks," Working Papers 2003-010, Federal Reserve Bank of St. Louis.
    4. Canova, Fabio & López-Salido, J David & Michelacci, Claudio, 2008. "The Effects of Technology Shocks on Hours and Output: A Robustness Analysis," CEPR Discussion Papers 6720, C.E.P.R. Discussion Papers.
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    8. John Fernald, 2004. "Trend Breaks, Long Run Restrictions, and the Contractionary Effects of Technology Shocks," 2004 Meeting Papers 477, Society for Economic Dynamics.
    9. Jordi Galí & Pau Rabanal, 2004. "Technology Shocks and Aggregate Fluctuations," IMF Working Papers 04/234, International Monetary Fund.
    10. Christopher A. Sims & Tao Zha, 1995. "Error bands for impulse responses," Working Paper 95-6, Federal Reserve Bank of Atlanta.
    11. Lawrence J. Christiano & Martin Eichenbaum & Robert Vigfusson, 2006. "Assessing structural VARs," International Finance Discussion Papers 866, Board of Governors of the Federal Reserve System (U.S.).
      • Lawrence J. Christiano & Martin Eichenbaum & Robert Vigfusson, 2007. "Assessing Structural VARs," NBER Chapters, in: NBER Macroeconomics Annual 2006, Volume 21, pages 1-106 National Bureau of Economic Research, Inc.
    12. Sims, Christopher A & Zha, Tao, 1998. "Bayesian Methods for Dynamic Multivariate Models," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(4), pages 949-68, November.
    13. Kim, Sangho & Lim, Hyunjoon & Park, Donghyun, 2010. "Productivity and Employment in a Developing Country: Some Evidence from Korea," World Development, Elsevier, vol. 38(4), pages 514-522, April.
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