chapter  3
21 Pages

Oil prices and the macroeconomy

WithLance J. Bachmeier, Michael D. Plante

This chapter provides an introduction to the literature on the response of the macroeconomy to oil price shocks. We focus on papers that use vector autoregressive and dynamic stochastic general equilibrium models to quantify the effect of an oil price shock on GDP, inflation, and related variables, and suggest directions for future research. In spite of the large existing literature spanning several decades, many important questions remain unanswered.