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Article: Oil price volatility and U.S. macroeconomic activity.
- Article from:
- Federal Reserve Bank of St. Louis Review
- Article date:
- November 1, 2005
- Author:
CopyrightCOPYRIGHT 2005 Federal Reserve Bank of St. Louis. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. (Hide copyright information)
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Oil shocks exert influence on macroeconomic activity through various channels, many of which imply a symmetric effect. However, the effect can also be asymmetric. In particular, sharp oil price changes--either increases or decreases--may reduce aggregate output temporarily because they delay business investment by raising uncertainty or induce costly sectoral resource reallocation. Consistent with these asymmetric-effect hypotheses, the authors find that a volatility measure constructed using daily crude oil futures prices has a negative and significant effect on future gross domestic product (GDP) growth over the period 1984-2004. Moreover, the effect becomes more ...