Econbrowser: Oil shocks and recessions.
This is worthy of your attention. Prof. Hamilton suggests that the current global recession was heavily influenced by the global oil shock last summer during which oil prices rocketed to nearly $140.00 a barrel. He suggests that oil price shocks were influential in 12 of the last 13 recessions. While they are not the sole cause of recessions, sharp increases in oil prices do act as a punitive tax on consumers. They must make very significant trade-offs between keeping gas in the tank and spending on discretionary items. Discretionary items tend to lose out in this battle which contributes to a significant slowdown in GDP (consumers account for more than 2/3rds of total GDP).
Clearly, the headline grabbing issues of today were materially involved as well but Prof. Harrison's arguments are credible and worthy of inclusion as to what lead to the recession and how best to recover going forward. it would appear from this research that managing oil prices, similar to managing inflation, should be a key component of monetary and fiscal policy.
This is worthy of your attention. Prof. Hamilton suggests that the current global recession was heavily influenced by the global oil shock last summer during which oil prices rocketed to nearly $140.00 a barrel. He suggests that oil price shocks were influential in 12 of the last 13 recessions. While they are not the sole cause of recessions, sharp increases in oil prices do act as a punitive tax on consumers. They must make very significant trade-offs between keeping gas in the tank and spending on discretionary items. Discretionary items tend to lose out in this battle which contributes to a significant slowdown in GDP (consumers account for more than 2/3rds of total GDP).
Clearly, the headline grabbing issues of today were materially involved as well but Prof. Harrison's arguments are credible and worthy of inclusion as to what lead to the recession and how best to recover going forward. it would appear from this research that managing oil prices, similar to managing inflation, should be a key component of monetary and fiscal policy.
