Energy Business Cycles
34 Pages Posted: 22 Jan 2016 Last revised: 18 Mar 2020
Date Written: November 1, 2015
We provide a structural investigation and interpretation of the questions: What is the origin of business cycle fluctuations? What is the main source of recessions, in particular, since the early 1970s? Are there energy business cycles? Indirect Inference estimation of a two-sector dynamic stochastic general equilibrium (DSGE) model with energy use in production is employed for this purpose, with a historical decomposition of output used to summarise our findings. According to the estimated model, the contribution of energy price shocks itself to the last five US recessions is small and negligible. Whereas, over the same 1970-2012 period, sectoral energy-input efficiency shocks and the exogenous world price of imported energy-intensive goods play dominant roles in causing declines in output.
Keywords: Two sector, US DSGE model, Oil price volatility, Open economy, Indirect inference
JEL Classification: E32, D58, F41, C52, Q43
Suggested Citation: Suggested Citation