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

See all articles by Michael Alexeev

Michael Alexeev

Indiana University Bloomington - Department of Economics; Russian Presidential Academy of National Economy and Public Administration

Yao-Yu Chih

Texas State University, San Marcos - Department of Finance and Economics

Date Written: October 1, 2017

Abstract

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

Suggested Citation

Alexeev, Michael V. and Chih, Yao-Yu, Oil Price Shocks and Economic Growth in the US (October 1, 2017). CAEPR Working Paper No. 2017-011. Available at SSRN: https://ssrn.com/abstract=3049895 or http://dx.doi.org/10.2139/ssrn.3049895

Michael V. Alexeev (Contact Author)

Indiana University Bloomington - Department of Economics ( email )

Wylie Hall 105
Bloomington, IN 47405-6620
United States

Russian Presidential Academy of National Economy and Public Administration ( email )

pr. Vernadskogo, 84
Moscow, 119571
Russia

Yao-Yu Chih

Texas State University, San Marcos - Department of Finance and Economics ( email )

San Marcos, TX 78666
United States

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