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Declining Effects of Oil Price Shocks

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  • MUNECHIKA KATAYAMA

Abstract

In recent years, output responses to oil price shocks have not only been weaker, but have also reached their trough earlier. This paper builds a model that incorporates a realistic structure of U.S. petroleum consumption and explores three possible explanations for the changes. The possible factors considered are (i) deregulation in the transportation industry, (ii) improved energy efficiency, and (iii) a lower degree of persistence of oil price shocks. Under realistic parameter values, the three factors play an important role quantitatively, accounting for half of the reduction in the largest impact on output of an oil price shock over time.

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  • Munechika Katayama, 2013. "Declining Effects of Oil Price Shocks," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 45(6), pages 977-1016, September.
  • Handle: RePEc:wly:jmoncb:v:45:y:2013:i:6:p:977-1016
    DOI: 10.1111/jmcb.12041
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