Oil prices and U.S. aggregate economic activity: a question of neutrality
Considerable research finds oil price shocks have had major effects on U.S. output and inflation. Several recent studies argue that the response of monetary policy-rather than the oil price shocks themselves-caused the fluctuations in economic activity. Stephen Brown and Mine Yucel show that an oil price increase will lead to a decline in real GDP and an increase in the price level that are of a similar magnitude if the federal funds rate is unconstrained-a finding consistent with the definition of monetary neutrality in which nominal GDP is constant. Brown and Yucel also find that holding the federal funds rate constant in the face of an oil price increase is an accommodative policy that boosts real GDP, the price level, and nominal GDP. In short, the monetary authority can use accommodative policy to cushion the negative effects of higher oil prices on real GDP, but at the expense of higher inflation.
Volume (Year): (1999)
Issue (Month): Q II ()
|Contact details of provider:|| Web page: http://www.dallasfed.org/|
More information through EDIRC
|Order Information:|| Email: |
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.:
- 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.
When requesting a correction, please mention this item's handle: RePEc:fip:fedder:y:1999:i:qii:p:16-23. 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: (Amy Chapman)
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.