Oil Price Changes and Unemployment Rate in the U.S. and Chile

Author

Agamani MaityFollow

Date of Graduation

Spring 5-15-2020

Document Type

Thesis

Degree Name

Master of Science in International and Development Economics (MSIDEC)

College/School

College of Arts and Sciences

Department/Program

Economics

First Advisor

Professor Libo Xu

Abstract

Abstract

There is a recurring question in theoretical, empirical and policy work is what the effects of higher oil prices are on the country’s macroeconomic aggregates. Empirical evidence in support of the view that fluctuation in the economy due to the interaction of macroeconomic variables is caused by oil price was based on inappropriate econometric models. These studies do not capture the composition of the price of oil that is affected by the exogenous oil shocks and has an indirect or direct impact on the macroeconomic aggregates. In this study, we decompose the change in oil prices into three structural shocks. We then study the response of unemployment to the shocks in the U.S. and Chile. U.S. and Chile are the countries that import crude oil until recently when the U.S. has started exporting oil and aims to be “Energy Independence” while the demand for oil in Chile has increased exponentially leading to a dramatic increase in crude oil import. We, therefore, explore potential mechanisms: Response of unemployment rate across gender to the exogenous oil shocks. The paper proposes a Structural Vector Auto Regression (VAR)[1] model that documents the response of unemployment rate to the exogenous oil. Our results suggest that the unemployment rate across gender responses differently to the three oil shocks in the U.S. and Chile.

[1]. In the rest of the paper, I use the abbreviation of Vector Auto Regression as VAR

Recommended Citation

Maity, Agamani, "Oil Price Changes and Unemployment Rate in the U.S. and Chile" (2020). Master's Theses. 1304.
https://repository.usfca.edu/thes/1304