Oil Price Shocks and Economic Growth in the US
CAEPR Working Paper No. 2017-011
39 Pages Posted: 10 Oct 2017 Last revised: 11 Oct 2017
Date Written: October 1, 2017
We apply both conventional and spatial techniques to panel data for US states to examine the effects of plausibly exogenous oil price shocks on economic growth. Contrary to the oil curse claims, we find that oil price shocks have numerically moderate but highly statistically significant positive direct effects on growth while the indirect effects are insignificant. We also find that positive impact of oil occurs only in states with a high value of the economic freedom index. In a technical contribution to the spatial econometrics literature we propose a procedure for estimating marginal effects of oil price shocks in a model with interaction terms. In addition, we show that the cumulative direct oil price effects on economic growth are persistent over time.
Keywords: Oil Curse, Regional Economic Growth, Spatial Lags
JEL Classification: Q32, R11, C33
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