Advanced Search
MyIDEAS: Login to save this paper or follow this series

Productivity, Energy Prices and the Great Moderation: A New Link

Contents:

Author Info

  • Pedro Silos

    (Federal Reserve Bank of Atlanta)

  • Karsten Jeske

    (Federal Reserve Bank of Atlanta)

  • Rajeev Dhawan

    (Georgia State University)

Abstract

We study how total factor productivity (TFP), energy prices and the great moderation are linked. First, we estimate a joint stochastic process for the energy price and TFP and establish that until 1982:II, energy prices negatively affected productivity. This spill-over has since disappeared. Second, we show that within the framework of a Dynamic Stochastic General Equilibrium (DSGE) model, the disappearance of this energy-productivity spill-over generates the significantly lower volatility of output and its components. Specifically, the change in the joint stochastic process accounts for close to 70 percent of the moderation in output volatility.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.economicdynamics.org/meetpapers/2008/paper_877.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Society for Economic Dynamics in its series 2008 Meeting Papers with number 877.

as in new window
Length:
Date of creation: 2008
Date of revision:
Handle: RePEc:red:sed008:877

Contact details of provider:
Postal: Society for Economic Dynamics Christian Zimmermann Economic Research Federal Reserve Bank of St. Louis PO Box 442 St. Louis MO 63166-0442 USA
Fax: 1-314-444-8731
Email:
Web page: http://www.EconomicDynamics.org/society.htm
More information through EDIRC

Related research

Keywords:

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Sylvain Leduc & Keith Sill, 2006. "Monetary policy, oil shocks, and TFP: accounting for the decline in U.S. volatility," International Finance Discussion Papers, Board of Governors of the Federal Reserve System (U.S.) 873, Board of Governors of the Federal Reserve System (U.S.).
  2. Collard, Fabrice & Juillard, Michel, 1999. "Accuracy of stochastic perturbuation methods: the case of asset pricing models," CEPREMAP Working Papers (Couverture Orange) 9922, CEPREMAP.
  3. Ben S. Bernanke & Mark Gertler & Mark Watson, 1997. "Systematic Monetary Policy and the Effects of Oil Price Shocks," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 28(1), pages 91-157.
  4. Hamilton, James D., 2003. "What is an oil shock?," Journal of Econometrics, Elsevier, Elsevier, vol. 113(2), pages 363-398, April.
  5. Rajeev Dhawan & Karsten Jeske & Pedro Silos, 2010. "Productivity, Energy Prices and the Great Moderation: A New Link," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 13(3), pages 715-724, July.
  6. Alejandro Justiniano & Giorgio E. Primiceri, 2006. "The Time Varying Volatility of Macroeconomic Fluctuations," NBER Working Papers 12022, National Bureau of Economic Research, Inc.
  7. Anton Nakov & Andrea Pescatori, 2010. "Oil and the Great Moderation," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 120(543), pages 131-156, 03.
  8. In-Moo Kim & Prakash Loungani, 1991. "The role of energy in real business cycle models," Working Paper Series, Macroeconomic Issues, Federal Reserve Bank of Chicago 91-6, Federal Reserve Bank of Chicago.
  9. Kilian, Lutz, 2006. "Not All Oil Price Shocks Are Alike: Disentangling Demand and Supply Shocks in the Crude Oil Market," CEPR Discussion Papers, C.E.P.R. Discussion Papers 5994, C.E.P.R. Discussion Papers.
  10. Fernández-Villaverde, Jesús & Rubio-Ramirez, Juan Francisco, 2006. "Estimating Macroeconomic Models: A Likelihood Approach," CEPR Discussion Papers, C.E.P.R. Discussion Papers 5513, C.E.P.R. Discussion Papers.
  11. James H. Stock & Mark W. Watson, 2002. "Has the Business Cycle Changed and Why?," NBER Working Papers 9127, National Bureau of Economic Research, Inc.
  12. Chang-Jin Kim & Charles R. Nelson, 1999. "Has The U.S. Economy Become More Stable? A Bayesian Approach Based On A Markov-Switching Model Of The Business Cycle," The Review of Economics and Statistics, MIT Press, vol. 81(4), pages 608-616, November.
  13. Herrera, Ana María & Pesavento, Elena, 2009. "Oil Price Shocks, Systematic Monetary Policy, And The “Great Moderation”," Macroeconomic Dynamics, Cambridge University Press, Cambridge University Press, vol. 13(01), pages 107-137, February.
  14. David K. Backus & Mario J. Crucini, 1998. "Oil Prices and the Terms of Trade," NBER Working Papers 6697, National Bureau of Economic Research, Inc.
  15. Rajeev Dhawan & Karsten Jeske, 2007. "What determines the output drop after an energy price increase: household or firm energy share?," Working Paper, Federal Reserve Bank of Atlanta 2007-20, Federal Reserve Bank of Atlanta.
  16. Kilian, Lutz, 2007. "The Economic Effects of Energy Price Shocks," CEPR Discussion Papers, C.E.P.R. Discussion Papers 6559, C.E.P.R. Discussion Papers.
  17. Davis, Steven J. & Haltiwanger, John, 2001. "Sectoral job creation and destruction responses to oil price changes," Journal of Monetary Economics, Elsevier, Elsevier, vol. 48(3), pages 465-512, December.
  18. Lee Ohanian & Andres Arias & Gary Hansen, 2005. "Why have business cycle fluctuations become less volatile?," 2005 Meeting Papers, Society for Economic Dynamics 927, Society for Economic Dynamics.
  19. Owyang, Michael T. & Piger, Jeremy & Wall, Howard J., 2008. "A state-level analysis of the Great Moderation," Regional Science and Urban Economics, Elsevier, Elsevier, vol. 38(6), pages 578-589, November.
  20. Luca Gambetti & Jordi Galí, 2007. "On the sources of the Great Moderation," Proceedings, Federal Reserve Bank of San Francisco, Federal Reserve Bank of San Francisco, issue Nov.
  21. Polgreen, Linnea & Silos, Pedro, 2009. "Crude substitution: The cyclical dynamics of oil prices and the skill premium," Journal of Monetary Economics, Elsevier, Elsevier, vol. 56(3), pages 409-418, April.
  22. Bernanke, Ben S & Gertler, Mark & Watson, Mark W, 2004. "Oil Shocks and Aggregate Macroeconomic Behavior: The Role of Monetary Policy: Reply," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 36(2), pages 287-91, April.
  23. Patrick J. Kehoe & Andrew Atkeson, 1999. "Models of Energy Use: Putty-Putty versus Putty-Clay," American Economic Review, American Economic Association, American Economic Association, vol. 89(4), pages 1028-1043, September.
  24. Lutz Kilian, 2008. "Exogenous Oil Supply Shocks: How Big Are They and How Much Do They Matter for the U.S. Economy?," The Review of Economics and Statistics, MIT Press, vol. 90(2), pages 216-240, May.
  25. Hamilton, James D & Herrera, Ana Maria, 2004. "Oil Shocks and Aggregate Macroeconomic Behavior: The Role of Monetary Policy: Comment," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 36(2), pages 265-86, April.
  26. Rajeev Dhawan & Karsten Jeske, 2008. "Energy Price Shocks and the Macroeconomy: The Role of Consumer Durables," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 40(7), pages 1357-1377, October.
  27. Hamilton, James D, 1983. "Oil and the Macroeconomy since World War II," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 91(2), pages 228-48, April.
  28. Linnea Polgreen & Pedro Silos, 2006. "Crude substitution: the cyclical dynamics of oil prices and the college premium," Working Paper, Federal Reserve Bank of Atlanta 2006-14, Federal Reserve Bank of Atlanta.
  29. Mark A. Hooker, 1999. "Oil and the macroeconomy revisited," Finance and Economics Discussion Series, Board of Governors of the Federal Reserve System (U.S.) 1999-43, Board of Governors of the Federal Reserve System (U.S.).
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 in new window

Cited by:
  1. Rajeev Dhawan & Karsten Jeske & Pedro Silos, 2010. "Productivity, Energy Prices and the Great Moderation: A New Link," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 13(3), pages 715-724, July.
  2. Jambu, Marc-Antoine, 2010. "Has the Globalisation really generated more competition in OECD economies," MPRA Paper 19974, University Library of Munich, Germany.
  3. William T. Gavin & Benjamin D. Keen & Finn E. Kydland, 2013. "Monetary policy, the tax code, and the real effects of energy shocks," Working Papers, Federal Reserve Bank of Dallas 1304, Federal Reserve Bank of Dallas.
  4. Munechika Katayama, . "Declining Effects of Oil-Price Shocks," Departmental Working Papers, Department of Economics, Louisiana State University 2009-02, Department of Economics, Louisiana State University.
  5. Carolyn Fischer & Garth Heutel, 2013. "Environmental Macroeconomics: Environmental Policy, Business Cycles, and Directed Technical Change," Annual Review of Resource Economics, Annual Reviews, Annual Reviews, vol. 5(1), pages 197-210, 06.
  6. Finn E. Kydland & Fei Mao & William T. Gavin, 2011. "Monetary Policy, the Tax Code, and Energy Price Shocks," 2011 Meeting Papers, Society for Economic Dynamics 1160, Society for Economic Dynamics.
  7. Yazid Dissou & Lilia Karnizova & Qian Sun, 2012. "Industry-level Econometric Estimates of Energy-capital-labour Substitution with a Nested CES Production Function," Working Papers, University of Ottawa, Department of Economics 1214E, University of Ottawa, Department of Economics.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:red:sed008:877. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christian Zimmermann).

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 references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.

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