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Oil Shock Impacts on the Borderplex Regional Economy

Listed author(s):
  • Thomas M. Fullerton

    (Department of Economics & Finance, University of Texas at El Paso, El Paso, TX 79968-0543, USA.)

  • Teodulo Soto

    (El Paso Electric Company, PO Box 982, El Paso, TX 79960, USA.)

This study analyzes the effect of oil price shocks on the economies of El Paso, Texas and Ciudad Juarez, Chihuahua, jointly referred to as the “Borderplex”. It employs a measure of the net oil price increase developed by Hamilton (1996) in a manner similar to that applied by Sill (2007) to the United States national economy. Impulse response functions are calculated to determine the impact of 10-percent oil price shocks on the Borderplex regional economy. The asymmetrical relationship between oil prices and economic performance is also examined using a net oil price decrease variable. Results found in this study are inconclusive. Negative and statistically significant relationships for the net oil price increase are obtained in the El Paso real personal income, El Paso non-agricultural employment, Ciudad Juarez retail sales, and Ciudad Juarez formal sector employment equations. Inconsistent results are reported for the El Paso retail sales equation, while there appears to be no relationship between net oil price increases and El Paso gross metropolitan product or between net oil price increases and El Paso median existing single family house prices. The results presented in this study do not find definitive evidence in support of an asymmetrical relationship between oil prices and metropolitan economic performance.

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Article provided by Econjournals in its journal International Journal Of Energy Economy And Policy.

Volume (Year): 5 (2015)
Issue (Month): 1 ()
Pages: 14-26

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Handle: RePEc:eco:journ2:2015-01-02
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  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. Sahbi FARHANI, 2012. "Impact of Oil Price Increases on U.S. Economic Growth:Causality Analysis and Study of the Weakening Effects in Relationship," International Journal of Energy Economics and Policy, Econjournals, vol. 2(3), pages 108-122.
  3. James D. Hamilton, 2009. "Causes and Consequences of the Oil Shock of 2007-08," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 40(1 (Spring), pages 215-283.
  4. Hamilton, James D., 2003. "What is an oil shock?," Journal of Econometrics, Elsevier, vol. 113(2), pages 363-398, April.
  5. Luís Aguiar-Conraria & Yi Wen, 2007. "Understanding the Large Negative Impact of Oil Shocks," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(4), pages 925-944, June.
  6. Radha Bhattacharya, 2003. "Sources of variation in regional economies," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 37(2), pages 291-302, May.
  7. Gilmer, Robert W. & Coronado, Roberto, 2012. "El Paso and Texas border cities close the gap in per capita income," Crossroads, Federal Reserve Bank of Dallas, issue 2, pages 1-8.
  8. Koop, Gary, 1996. "Parameter uncertainty and impulse response analysis," Journal of Econometrics, Elsevier, vol. 72(1-2), pages 135-149.
  9. Pagan, Adrian, 1974. "A Generalised Approach to the Treatment of Autocorrelation," Australian Economic Papers, Wiley Blackwell, vol. 13(23), pages 267-280, December.
  10. Kevin L. Kliesen, 2008. "Oil and the U.S. macroeconomy: an update and a simple forecasting exercise," Review, Federal Reserve Bank of St. Louis, issue Sep, pages 505-516.
  11. 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.
  12. Douglas R. Bohi & John R. Powers, 1993. "Energy Price Shocks And Regional Output And Employment," The Review of Regional Studies, Southern Regional Science Association, vol. 23(2), pages 129-142, Fall.
  13. Hoag, John H. & Wheeler, Mark, 1996. "Oil price shocks and employment: the case of Ohio coal mining," Energy Economics, Elsevier, vol. 18(3), pages 211-220, July.
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