Abstract:

All economies suffer from two main economic problems: Inflation and unemployment. Economists have long been concerned with empirical evidence suggesting that oil price shocks may be closely related to macroeconomic performance. This interest dates back to the 1970s. It was natural, therefore, to suspect a causal relationship from oil prices to US macroeconomic aggregates. Since then, a large body of work has accumulated, which aims to establish this link on a theoretical basis and provide empirical evidence in its support. Movements in oil prices have complicated the tasks of policy makers and business leaders over the past three decades. Increases in inflation in the 1970s are partly due to rapid increases in oil prices. The prolonged decline in inflation in the 1980s and 1990s was in turn associated with the fall in oil prices. Therefore, a clear understanding of the strength of the empirical link between oil price changes and inflation is key to the smooth running of monetary policy. For this reason, it is aimed to make a judgment by establishing a model that regulates the relationship between oil prices and parameters such as inflation, energy, unemployment, GDP, national savings, exports and imports on the US economy and these results are interpreted.

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