Oil Prices, Macroeconomics and Shocks...

4:23 PM Posted by Baris Sanli
There are very good articles on oil prices and macroeconomics. "The oil price and macroeconomy: what's going on?" by Olivier Blanchard and Marianna Riggi claims that the changes in labor markets and monetary policies("structural changes") can be the usual suspects when it comes to resilient economies to oil price hikes. They have two conclusions:
1. "weakening unions, increasing competition and declining minimum wage have made the structure of labor compensation much more flexible in the 2000s than it was in the 1970s"
2. "increased anchoring of inflation expectations, and in particular with the decrease in the response of expected inflation to an oil price surge since the mid-1980s"
There is also "Why are the 2000s so different from the 1970s? A structural interpretation of changes in the macroeconomic effects of oil prices" , from the same writers is also giving the details for such conclusions.

Also, "Some thoughts on Energy independence" from EconBrowser has a good discussion for demand side and supply side effects of oil prices. He concludes : "increasing the substitutability between energy and other consumption goods, and reducing the amount of oil use would mitigate the negative consequences of oil price shocks."

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References:
The oil price and macroeconomy: what's going on?, by Olivier Blanchard and Marianna Riggi http://www.voxeu.org/index.php?q=node/4341
Why are the 2000s so different from the 1970s? A structural interpretation of changes in the macroeconomic effects of oil prices" , http://www.nber.org/papers/w15467
Some thoughts on Energy independence, http://www.econbrowser.com/archives/2011/04/some_thoughts_o_2.html
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