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Business cycles: the role of energy prices

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  • Stephen P. A. Brown
  • Mine K. Yücel
  • John Thompson

Abstract

Oil price shocks have figured prominently U.S. business cycles since the end of World War II—although the relationship seems to have weakened during the 1990s. In addition the economy appears to respond asymmetrically to oil price shocks, rising oil prices hurt economic activity more than falling oil prices help it. This section of the Encyclopedia of Energy sorts through an extensive economics literature that relates oil price shocks to aggregate economic activity. It examines how oil price shocks create business cycles, why they seem to have a disproportionate effect on economic activity, why the economy responds asymmetrically to oil prices, and why the relationship between oil prices and economic activity may have weakened. It also addresses the issue of developing energy policy to mitigate the economic effects of oil price shocks.

Suggested Citation

  • Stephen P. A. Brown & Mine K. Yücel & John Thompson, 2003. "Business cycles: the role of energy prices," Working Papers 0304, Federal Reserve Bank of Dallas.
  • Handle: RePEc:fip:feddwp:03-04
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    File URL: http://www.dallasfed.org/assets/documents/research/papers/2003/wp0304.pdf
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    1. Nathan S. Balke & Stephen P.A. Brown & Mine K. Yucel, 2002. "Oil Price Shocks and the U.S. Economy: Where Does the Asymmetry Originate?," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 27-52.
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    Cited by:

    1. Scholtens, Bert & Yurtsever, Cenk, 2012. "Oil price shocks and European industries," Energy Economics, Elsevier, vol. 34(4), pages 1187-1195.
    2. Matteo Manera & Alessandro Cologni, 2006. "The Asymmetric Effects of Oil Shocks on Output Growth: A Markov-Switching Analysis for the G-7 Countries," Working Papers 2006.29, Fondazione Eni Enrico Mattei.

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    Keywords

    Petroleum industry and trade;

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