Facebook LinkedIn Twitter

IAEE Members and subscribers to The Energy Journal: Please log in to access the full text article or receive discounted pricing for this article.

Disentangling The Effects of oil Shocks: The Role of Rigidities and Monetary Policy

Using a new Keynesian, stochastic, dynamic model of a small open monetary economy that imports oil and applying it to the Spanish economy, this paper addresses the question of why the effects of oil shocks from the mid-1980�s on output and inflation were smaller. We depart from the previous literature on this topic by simulating a theoretical model whose parameters are estimated using Kalman Filter techniques. The paper is particularly appealing to study the effects of high energy prices, which would be associated to climate change policies, and to the feedback effects of those policies on the economy. The results of the paper support the hypothesis of smaller macroeconomic effects of oil shocks from the mid-1980�s. The results emerge from the different features of the economy: both labor market rigidities and the oil share have decreased over time and the monetary policy has changed in that it is more focused on controlling inflation.

Purchase ( $25 )

Energy Specializations: Petroleum – Markets and Prices for Crude Oil and Products; Energy Security and Geopolitics – Energy Security; Energy Modeling – Energy Data, Modeling, and Policy Analysis

JEL Codes:
L13 - Oligopoly and Other Imperfect Markets
Q48 - Energy: Government Policy
E61 - Policy Objectives; Policy Designs and Consistency; Policy Coordination

Keywords: Oil shocks, Monetary policy, DSGE new Keynesian model, Maximum likelihood estimation

DOI: 10.5547/ISSN0195-6574-EJ-Vol30-NoSI2-9

Published in Volume 30, Special Issue #2 of The Quarterly Journal of the IAEE's Energy Economics Education Foundation.