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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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    Bibliographic Info

    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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    Related research

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

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    1. Lawrence J. Christiano & Martin Eichenbaum & Robert Vigfusson, 2003. "What happens after a technology shock?," International Finance Discussion Papers 768, Board of Governors of the Federal Reserve System (U.S.).
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    3. Fabio Canova & David Lopez-Salido & Claudio Michelacci, 2010. "The effects of technology shocks on hours and output: a robustness analysis," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 25(5), pages 755-773.
    4. David O. Cushman & Tao Zha, 1995. "Identifying monetary policy in a small open economy under flexible exchange rates," Working Paper 95-7, Federal Reserve Bank of Atlanta.
    5. Lawrence J. Christiano & Martin Eichenbaum & Robert Vigfusson, 2006. "Assessing Structural VARs," NBER Working Papers 12353, National Bureau of Economic Research, Inc.
      • 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.
    6. 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.
    7. Jon Faust & Eric M. Leeper, 1994. "When do long-run identifying restrictions give reliable results?," Working Paper 94-2, Federal Reserve Bank of Atlanta.
    8. Jordi Gali, 2002. "New Perspectives on Monetary Policy, Inflation, and the Business Cycle," NBER Working Papers 8767, National Bureau of Economic Research, Inc.
    9. Olivier Jean Blanchard & Danny Quah, 1988. "The Dynamic Effects of Aggregate Demand and Supply Disturbance," Working papers 497, Massachusetts Institute of Technology (MIT), Department of Economics.
    10. 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.
    11. John Fernald, 2004. "Trend Breaks, Long Run Restrictions, and the Contractionary Effects of Technology Shocks," 2004 Meeting Papers 477, Society for Economic Dynamics.
    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. Jordi Galí & Pau Rabanal, 2004. "Technology Shocks and Aggregate Fluctuations," IMF Working Papers 04/234, International Monetary Fund.
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