In conclusion, not all recessions were caused primarily by higher oil prices, but according to the discussion paper Role of Oil Price Shocks in Causing U.S. “The Recessions” by L. Kilian & R. J. Vigfusson (2014), the effect of this commodity, contributing to a rescission is undeniable. 3 Oil price and economical activity The following Chapter illustrates the relationship between oil price fluctuations and the economic activity, in terms of the GDP. To provide an overview of these contributions in this field is the primary aim of this thesis. Researchers are confident about the existence of this correlation. However the exact approach to model and the effects of it remain controversial. Chapter 3 is structured in the following order; 3.1 presents the literature background and is divided into, research overview and literature summary, 3.2 reviews the correlation of the economy and oil prices and 3.3 analyses the effect of increasing oil prices in relation to importing-, exporting oil countries and the stock market. Figure°14 Structure of the Chapter 3 3.1 Literature Review Due to the multi-dimensional impact of oil prices, many economists have dedicated their research to investigate the relationship between economic growth and oil prices. The literature to this date provides several different theories, which aim to build the link between this commodity and economic factors. The following section displays the findings in the chronological 3.1.1 Models in relation to the GDP and employment The oil crisis in 1973 and 1979 triggered the interest to investigate and quantify this relationship. The article, “Oil and the Macroeconomy since World War II” in the Journal of Political Economy by J. D. Hamilton (1983), stated that three to four quarters after an oil price increase the economic activity will slow down and recover after six to seven quarters. The linear correlation was proven valid in the period from 1948 to 1980. M. Gisser’s and T. H. Goodwin’s (1986) confirmed the results of Hamilton (1983), additionally they could prove that the model by Hamilton was applicable before and after the oil embargo in 1973. The book chapter, Shocks and the Dispersion Hypothesis” by P. Loungani “Oil (1986) investigated the link between oil price increase and labour market, and concluded that between 1947 - 1982 oil price shocks caused disturbances in the labour reallocation process.
In conclusion, not all recessions were caused primarily by higher oil prices, but according to the discussion paper “The Role of Oil Price Shocks in Causing U.S. Recessions” by L. Kilian & R. J. Vigfusson (2014), the effect of this commodity, contributing to a rescission is undeniable. 3 Oil price and economical activity The following Chapter illustrates the relationship between oil price fluctuations and the economic activity, in terms of the GDP. To provide an overview of these contributions in this field is the primary aim of this thesis. Researchers are confident about the existence of this correlation. However the exact approach to model and the effects of it remain controversial. Chapter 3 is structured in the following order; 3.1 presents the literature background and is divided into, research overview and literature summary, 3.2 reviews the correlation of the economy and oil prices and 3.3 analyses the effect of increasing oil prices in relation to importing-, exporting oil countries and the stock market. Figure°14 Structure of the Chapter 3 3.1 Literature Review Due to the multi-dimensional impact of oil prices, many economists have dedicated their research to investigate the relationship between economic growth and oil prices. The literature to this date provides several different theories, which aim to build the link between this commodity and economic factors. The following section displays the findings in the chronological 3.1.1 Models in relation to the GDP and employment The oil crisis in 1973 and 1979 triggered the interest to investigate and quantify this relationship. The article, “Oil and the Macroeconomy since World War II” in the Journal of Political Economy by J. D. Hamilton (1983), stated that three to four quarters after an oil price increase the economic activity will slow down and recover after six to seven quarters. The linear correlation was proven valid in the period from 1948 to 1980. M. Gisser’s and T. H. Goodwin’s (1986) confirmed the results of Hamilton (1983), additionally they could prove that the model by Hamilton was applicable before and after the oil embargo in 1973. The book chapter, “Oil Shocks and the Dispersion Hypothesis” by P. Loungani (1986) investigated the link between oil price increase and labour market, and concluded that between 1947 - 1982 oil price shocks caused disturbances in the labour reallocation process.
Bachelor_Thesis.docx