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Oil price shocks and the U.S. economy: where does the asymmetry originate?

Author

Listed:
  • Balke, Nathan S.
  • Brown, Stephen P. A.
  • Yücel, Mine

    (Federal Reserve Bank of Dallas)

Abstract

Rising oil prices appear to retard aggregate U.S. economic activity by more than falling oil prices stimulate it. Past research suggests adjustment costs and/or monetary policy may be possible explanations ofthe asymmetric response. This paper uses a quasi-vector autoregressive model of U. S. economy to examine from where the asymmetry might originate. The analysis uses counterfactual impulse response experiments to detennine that monetary policy alone cannot account for the asymmetry. The robustness ofshort-lived asymmetry across the base case and counterfactuals is consistent with the adjustment-cost explanation.

Suggested Citation

  • Balke, Nathan S. & Brown, Stephen P. A. & Yücel, Mine, 1999. "Oil price shocks and the U.S. economy: where does the asymmetry originate?," Working Papers 9911, Federal Reserve Bank of Dallas.
  • Handle: RePEc:fip:feddwp:99-11
    Note: Published as: Balke, Nathan S., Stephen P.A. Brown and Mine K. Yücel (2002), "Oil Price Shocks and the U.S. Economy: Where Does the Asymmetry Originate?," The Energy Journal 23 (3): 27-52.
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    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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