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Technology, Employment, and the Oil-Countries Business Cycle

  • Rodolfo Mendez-Marcano
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    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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    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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