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Strategies & Market Trends : Commodities - The Coming Bull Market
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To: craig crawford who wrote (1160)3/19/2002 1:49:08 AM
From: craig crawford   of 1643
 
Do We Really Know that Oil Caused the Great Stagflation? A Monetary Alternative
papers.nber.org

Robert B. Barsky, Lutz Kilian

NBER Working Paper No.w8389
Issued in July 2001

---- Abstract -----

This paper argues that major oil price increases were not nearly as essential a part of the causal mechanism that generated the stagflation of the 1970s as is often thought. There is neither a theoretical presumption that oil supply shocks are stagflationary nor robust empirical evidence for this view. In contrast, we show that monetary expansions and contractions can generate stagflation of realistic magnitude even in the absence of supply shocks. Furthermore, monetary fluctuations help to explain the historical movements of the prices of oil and other commodities, including the surge in the prices of industrial commodities that preceded the 1973/74 oil price increase. Thus, they can account for the striking coincidence of major oil price increases and worsening stagflation.
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