Commodity prices and growth: A changing relationship?

Lúcio Vinhas de Souza, 7 February 2013

Commodity price shocks are frequently considered among the most important potential threats to the global economy. However, since the second half of the 1980s, energy prices have experienced very large changes, with arguably limited effects on global GDP developments. This column presents evidence that oil shocks just aren’t what they used to be when it comes to macroeconomic effects.

Commodity price shocks – and, notable among those, energy price shocks– are frequently considered among the most important potential threats to the global economy. However, since the second half of the 1980s, energy prices have experienced very large changes, with arguably limited effects on global GDP developments.

Topics: Development, Energy
Tags: Commodity prices, energy prices, GDP growth

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Do oil prices help forecast US real GDP? The role of non-linearities and asymmetries

Lutz Kilian, 29 June 2012

It has long been argued that changes in the price of oil can help forecast US real GDP growth. This column addresses the common concern among many policymakers that the feedback from oil prices to the economy may become stronger once the price of oil reaches a certain level.

There has been much interest since the 1970s in the question of whether lagged oil price changes help forecast US real GDP growth (Hamilton 2009). This question has taken on new urgency following the large fluctuations in the price of oil in recent years.

Topics: Energy, Macroeconomic policy
Tags: energy prices, oil, oil prices, real GDP, US

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The price of oil and the state of the world economy: using terrorism as the instrumental variable

Natalie Chen, Liam Graham, Andrew J Oswald, 17 August 2008

Higher energy prices are likely to reduce profitability of industry and thus could bring about an economic downturn. The authors of DP 6937 experiment with terrorist acts as an instrumental variable, in order to examine the relationship between the price of oil, terrorist incidents and the resultant effects on profitability and margins.

There is both casual and formal evidence from the post-war period that abrupt movements in the price of oil have significant effects on the macroeconomy, as neoclassical economic theory would predict. Higher energy prices are likely to reduce profitability of industry and thus could bring about an economic downturn.

Journalists are entitled to free DP downloads on request; please contact pressoffice@cepr.org. To learn more about subscribing to CEPR's Discussion Paper Series, please visit the CEPR website.

URL: http://www.cepr.org/pubs/new-dps/dplist.asp?dpno=6937&action.x=0&action.y=0&action=ShowDP
Topics: Energy, Global economy
Tags: economic recession, energy prices, profitability, terrorism

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Spiralling oil prices: not such a shock?

Paul Edelstein, Lutz Kilian, 6 June 2007

Detailed date energy prices and consumer spending in the US from 1970 to 2006 show exactly how oil price changes affect the economy. The declining size of the US auto sector helped to contain the effects of recent oil shocks on the wider economy.

Oil shocks have a chilling reputation for wrecking economies: memories of fuel rationing and recession in the 1970s mean a sudden jump in the price of a barrel of crude is assumed to have a singularly disastrous effect on GDP growth today.

URL: to come
Topics: Energy, Global economy
Tags: consumer spending, energy prices, oil shocks