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Macroeconomic Responses to Oil Price Increases and Decreases in Seven OECD Countries

The correlations between oil-price movements and GDP fluctuations are investigated for the United States, Canada, Japan, Germany (West), France, the United Kingdom, and Norway. The responses to price increases and decreases are allowed to be asymmetric. Bivariate correlations as well as partial correlations within a reduced-form macroeconomic model are considered. The correlations with oil-price increases are negative and significant for most countries, but positive for Norway, whose oil-producing sector is large relative to the economy as a whole. The correlations with oil-price decreases are mostly positive, but significant only for the United States and Canada. Most countries show evidence of asymmetric effects, with Norway again as an exception.

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Energy Specializations: Petroleum – Markets and Prices for Crude Oil and Products; Energy Security and Geopolitics – Geopolitics of Energy

JEL Codes:
L13 - Oligopoly and Other Imperfect Markets
Q48 - Energy: Government Policy

Keywords: Oil price increases and decreases, OECD, oil price shocks,

DOI: 10.5547/ISSN0195-6574-EJ-Vol15-No4-2

Published in Volume15, Number 4 of The Quarterly Journal of the IAEE's Energy Economics Education Foundation.