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Unemployment, oil prices and the real interest rate: evidence from Canada and the UK

Carruth, A. and Hooker, M. and Oswald, A. (1994) Unemployment, oil prices and the real interest rate: evidence from Canada and the UK. CEP Discussion Papers, CEPDP0188. Centre for Economic Performance, London School of Economics and Political Science, London, UK.

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Identification Number: CEPDP0188

Abstract

There is still little agreement about what caused the large movement in unemployment in the industrialized nations in the 1970s and 1980s. This paper constructs a simple model in which the equilibrium rate of unemployment depends upon the real rate of interest and the real price of oil. When confronted with data from Canada and the UK, there is some support for the model''s predictions. Granger-casualty tests and regression results suggest that the real oil price is especially important. If a dynamic model is estimated up to the start of the 1980s, it successfully predicts (out of a sample) the behaviour of unemployment over the ensuing period. Nevertheless, an unexplained secular trend in unemployment is visible in the data.

Item Type: Monograph (Discussion Paper)
Official URL: http://cep.lse.ac.uk/_new/publications/series.asp?...
Additional Information: © 1994 The Authors
Subjects: H Social Sciences > HD Industries. Land use. Labor
Sets: Collections > Economists Online
Research centres and groups > Centre for Economic Performance (CEP)
Series: Working Papers > CEP Discussion Papers
Date Deposited: 12 Aug 2013 15:25
Last Modified: 12 Aug 2013 15:25
URI: http://eprints.lse.ac.uk/id/eprint/51658

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