How Energy Prices Shape OECD Economic Growth: Panel Evidence from Multiple Decades

Huntington, Hillard G. and Liddle, Brantley (2022): How Energy Prices Shape OECD Economic Growth: Panel Evidence from Multiple Decades.

Abstract

New fears about escalating fuel prices and accumulating inflation are raising concerns about the possible dimming of near-term prospects for world economic growth. The role of energy prices in shaping economic growth relates not only to geopolitical risks or environmental taxes but also to a range of strategies that place moratoria on primary energy sources like nuclear, coal, petroleum, and natural gas. Applying a new data set for country-level energy prices since 1960, this study evaluates the effects of energy prices on economic growth in 18 OECD countries by controlling for other important macroeconomic conditions that shape economic activity. Mean-group estimates that control for cross-country correlations are used to emphasize average responses across nations. Averaged across all nations, results suggest that a 10 percent increase in energy prices dampened economic growth by about 0.15 percent. Moreover, some evidence exists that this response may be larger for more energy-intensive economies.

• Item Type: MPRA Paper
• Language: English
• Keywords: OECD economic growth; energy prices; cross-country panel analysis
• Subjects: C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C23 - Panel Data Models ; Spatio-temporal Models; O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O47 - Empirical Studies of Economic Growth ; Aggregate Productivity ; Cross-Country Output Convergence; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q4 - Energy > Q43 - Energy and the Macroeconomy; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q5 - Environmental Economics > Q54 - Climate ; Natural Disasters and Their Management ; Global Warming

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