Effects of Oil Shocks on the Unemployment: GVAR Approach

Malek KhojastehNeghad
Raheleh Hosseini
JEL codes: 
E24 - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital, J69 - Other, Q43 - Energy and the Macroeconomy.
Oil is not only one of the most significant and useful consumer goods but also is a remarkable material in energy production all around the world which has a lot of price fluctuation. oil shocks consider as a principal factor of many financial crises and have various effects on economy of countries. Hence, the assessment of price fluctuations on macroeconomic variables such as unemployment seems important. This paper survey the oil price inconstancy on unemployment in 31countries during the period from the second quarter of 1985 to the fourth quarter of 2009 through Global Vector Auto-Regression model. Results demonstrate except of the rest of W. Europe, there is a positive relationship between oil prices oscillation and unemployment. It should be noted in many area the feedback along with the lag that depends on the ratio of oil cost in national income, reliance level to imported oil, end-users ability to reduce their usage and substitute other sources, gas consumption quantity in economy, effect of higher prices on other energy sources, monetary policies adopt when face with oil price swaging and capability of goverments to apply the vary policies.
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