Institut für Volkswirtschaftslehre

                                       Fachgebiet Dienstleistungs- und Arbeitsmarktökonomik (520G)

                                                                    
                                                                    
Prof. Dr. Thomas Beißinger


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Oil Price Shocks and the NAIRU 
University of Regensburg Discussion Paper No. 354, February 2001.

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Abstract:

Based on a model of a small open economy with imperfect competition on goods and labor markets the impact of oil price shocks on equilibrium unemployment is analyzed. One aim of this analysis is the identification of the main channels by which the NAIRU, i.e. the non-accelerating inflation rate of unemployment, is affected by oil price shocks. It is shown that the change in the NAIRU depends on parameters of the supply as well as the demand side. To make a quantitative assessment possible, the theoretical analysis is supplemented by simulation experiments. The second aim of the paper is the discussion of several policy measures by which the NAIRU could be stabilized if the economy was hit by adverse oil price shocks. Simulation experiments suggest that the most recommendable policy response consists of a combination of supply-side and demand-side policies.