TY  - JOUR
AU  - Barsky,Robert B.
AU  - Kilian,Lutz
TI  - Do We Really Know that Oil Caused the Great Stagflation? A Monetary Alternative
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 8389
PY  - 2001
Y2  - July 2001
UR  - http://www.nber.org/papers/w8389
L1  - http://www.nber.org/papers/w8389.pdf
N1  - Author contact info:
Robert B. Barsky
Department of Economics
University of Michigan
Ann Arbor, MI  48109-1220
Tel: 734/764-9476
Fax: 734/764-2769
E-Mail: barsky@umich.edu

Lutz Kilian
Dept.of Economics
University of Michigan
Ann Arbor,  MI 48109-1220
E-Mail: lkilian@umich.edu
M1  - published as Robert B. Barsky, Lutz Kilian. "Do We Really Know that Oil Caused the Great Stagflation? A Monetary Alternative," in Ben S. Bernanke and Kenneth Rogoff, editors, "NBER Macroeconomics Annual 2001, Volume 16" MIT Press (2002)

AB  - 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.
ER  -