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The macroeconomics outcome of oil shocks in the small Eurozone economies
Author(s) -
Raduzzi Raphael,
Ribba Antonio
Publication year - 2020
Publication title -
the world economy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.594
H-Index - 68
eISSN - 1467-9701
pISSN - 0378-5920
DOI - 10.1111/twec.12862
Subject(s) - economics , business cycle , oil price , vector autoregression , european union , monetary economics , structural vector autoregression , order (exchange) , monetary policy , macroeconomics , international economics , economy , finance
In this work, we provide an analysis over the period 1999–2015 of the effects of oil shocks on prices and GDP in a group of small Euro‐area economies. The group includes Austria, Belgium, Finland, Greece, Ireland, Italy, Netherlands, Portugal and Spain. In order to characterise the macroeconomic outcomes of movements in oil prices, we adopt the structural vector autoregression (VAR) methodology. We find that under the European Monetary Union (EMU), oil price shocks have been important drivers of business cycle fluctuations in almost all these countries. Moreover, an increase in oil prices produces significant recessionary effects in all the countries included in the investigation. Thus, although there are different sizes in the responses of output in the investigated countries, our main conclusion is that despite the structural changes experienced by the European economies in the last decades, oil prices still matter for these countries. In the light of these results, we also stress some important challenges for the conduct of monetary policy in the Euro area.