Abstract
Most previous studies have focused on whether oil price shocks cause economic recessions but fewer studies have investigated whether the impact of an oil price shock can be different under alternative economic conditions. Using an international data set of industrialized economies, this paper explores whether an economy relying more on oil or operating closer to full employment may be more vulnerable to an oil disruption. Although the results for oil dependence are ambiguous, the analysis does find a significant relationship between the impacts of an oil shock and how closely the economy is operating to its full-employment level prior to the disruption.
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