What is the impact of oil price changes on French growth?
The two oil shocks of the 1970s reduced the GDP growth rate. Since that period, sudden oil price increases have been considered as a major source of economic slowdown. We estimate VAR models and Markov-Switching models to evaluate the impact of oil price increases on French growth. Our results indicate a breakdown in the relationship between oil prices and economic activity at the beginning of the 1980s. Over the period 1980-2006, our estimations show a slight negative effect of oil price increases only during low-growth phases. Our models also underlight a slowdown in the foreign demand following an oil price increase. The GDP growth rate is indirectly affected by this foreign demand decrease.
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