the role of the trade channel in the propagation of oil supply shocks abstract this paper analyzes when and why idiosyncratic oil supply shocks produce large macroeconomic effects in an analytically tractable two country general equilibrium model we focus on a demand driven mechanism the trade channel which transmits oil shocks across economies through changes in the non oil goods terms of trade when the trade channel is operative we have three main consequences on the transmission of oil shocks first the macroeconomic impact of oil shocks may be large and asymmetric across countries second the magnitude of the effects is nonlinear in the size of the oil shock third terms of trade movements never ensure international risk sharing after an idiosyncratic oil supply shock

health and work in the family evidence from spouses cancer diagnoses abstract using canadian administrative data from multiple sources we provide the first nationally representative estimates for the effect of spouses cancer diagnoses on individuals employment and earnings and on family income our identification strategy exploits unexpected health shocks and combines matching with individual fixed effects in a generalized difference in differences framework to control for observable and unobservable heterogeneity while the effect of spousal health shocks on labor supply is theoretically ambiguous we find strong evidence for a decline in employment and earnings of individuals whose spouses are diagnosed with cancer we interpret this result as individuals reducing their labor supply to provide care to their sick spouses and to enjoy joint leisure family income substantially declines after spouses cancer diagnoses suggesting that the financial consequences of such health shocks are considerable

long term and spillover effects of health shocks on employment and income abstract we use matching combined with difference in differences to identify the causal effects of sudden illness represented by acute hospitalizations on employment and income up to six years after the health shock using linked dutch hospital and tax register data an acute hospital admission lowers the employment probability by seven percentage points and results in a 5 percent loss of personal income two years after the shock there is no subsequent recovery in either employment or income there are large spillover effects household income falls by 50 percent more than the income of the disabled person

the distribution of wealth with imperfect altruism abstract in this paper we study the distribution of wealth in an economy with infinitely lived families individual generations of each family may or may not be altruistic this is represented as a preference shock which follows a first order markov process within each family a feature representingimperfect altruism altruistic individuals care about the welfare of their children and are likely to leave bequests selfish ones do not this results in a non trivial distribution of wealth among families at any point in time we study an economy with a risk free linear production technology and show that a stationary distribution of wealth exists this distribution is discrete and approximates the pareto distribution under additional restrictions we also characterize conditions on the production technology which yields perpetual growth with increasing inequality journal of economic literatureclassification numbers d31 d91 e21

stationary sunspot equilibria in a finance constrained economy abstract stationary sunspot equilibria are shown to exist in a production economy with infinite lived agents when it is not possible to borrow against future wage income equilibrium fluctuations exhibit persistence over time scales of the same order of magnitude as observed business cycles an active fiscal policy that stabilizes aggregate money expenditures can prevent such fluctuations

determinacy of equilibrium in stationary economies with both finite and infinite lived consumers abstract we consider the determinacy of perfect foresight equilibrium near steady state equilibria of stationary infinite horizon economies the work of t j kehoe and d k levine econometrica 53 1985 433 453 is generalized by the inclusion of both infinite lived agents and overlapping generations of finite lived agents and the inclusion of production and non depreciating pure rents we show that indeterminacy is possible in robust examples and that the dimension of the indeterminacy can be as large as the number of goods per period we also discuss extreme cases in which determinacy is guaranteed

variance properties of solow s productivity residual and their cyclical implications abstract for the united states economy 1960 1989 the correlation between the growth rates of the solow residual and the real price of energy government spending is 0 55 0 09 this study develops a model to see if it quantitatively captures the endogenous transmission mechanism underlying the observed solow residual correlations it does the transmission mechanism depends on endogenous capital utilization incorporating shocks to true technology energy prices and government spending the model economy accounts for 76 or 89 percent of u s output volatility and is generally consistent with features of u s business cycles

the role of energy in real business cycle models abstract this paper modifies hansen s 1985 analysis of a real business cycle mode with indivisible labor by explicitly including energy as a productive input and modelling the relative price of energy as an exogenous random process one goal is to determine the extent to which the introduction of energy price shocks reduces the reliance of the real business cycle model on unobserved technology shocks the other goal following christiano and eichenbaum 1991 is to compare the correlation between real wages and hours predicted by the energy inclusive model to that predicted by hansen s model

women s labor market reactions to family disruptions shadow price varies over time it is shown that the change in a woman s labor supply is related to the deviation of the husband s actual work hours from the expected amount the estimation indicates that the largest response to the loss of husband s income occurs with a divorce or separation smaller effects are noted for widowhood husband s unexpected unemployment or health change m x easuring reactions of a married woman s labor supply to shocks to her household presents a research problem that is best addressed in a dynamic framework but recent empirical research on this topic has been conducted in a static environment in this study a dynamic model which allows for uncertainty is developed and empirically implemented with the goal of measuring the labor force response of a woman to changes in her husband s contribution to household earnings the model suggests a simple form to quantify the size of an unexpected shock to the household this shock resulting from changes in her marital status a worsening of her husband s health or her husband becoming unemployed the basic behavioral assumption is that a woman forms expectations of her husband s likely contribution to household income based on their prior experiences and she then reacts to the particular circumstances encountered in a given year in an uncertain world shocks almost always occur where a shock is defined as the difference between

the power of love abstract we show that the presence of at least one individual who loves its children whatever the intensity of this love allows to avoid a possible global contraction of the economy

fiscal policy in a growth model with both altruistic and nonaltruistic agents this paper examines the long run behavior of an overlapping generations model with a population consisting of altruistic and nonaltruistic agents it also studies the effect of fiscal policy on aggregate capital accumulation and on the welfare of both types of agents it shows that an increase in the relative number of nonaltruists is pareto improving in the steady state it also shows that the introduction of public debt or unfunded social security has no effect on the longrun equilibrium but implies a transfer of resources from the nonaltruistic to the altruistic agents finally it indicates that inheritance taxation hurts not only the altruists but also the nonaltruists

models of energy use putty putty versus putty clay energy use is inelastic in time series data but elastic in international cross section data two models of energy use reproduce these elasticities a putty putty model with adjustment costs developed by pindyck and rotemberg 1983 and a putty clay model in the pindyck rotemberg model capital and energy are highly complementary in both the short run and the long run in the putty clay model capital and energy are complementary in the short run but substitutable in the long run we highlight the differences in the cross section implications of the models by considering the effect of an energy tax on output in both models in the putty putty model an energy tax that doubles the price of energy leads to a fall in output in the long run of 33 in contrast the same tax in the putty clay model leads to a fall in output of only 5 3

imperfect competition and the effects of energy price increases on economic activity the authors show that modifying the standard neoclassical growth model by assuming that competition is imperfect makes it easier to explain the size of the declines in output and real wages that follow increases in the price of oil plausibly parameterized models of this type are able to mimic the response of output and real wages in the united states the responses are particularly consistent with a model of implicit collusion where markups depend positively on the ratio of the expected present value of future profits to the current level of output copyright 1996 by ohio state university press

determinacy of equilibria in dynamic models with finitely many consumers abstract we consider a production economy with a finite number of heterogeneous infinitely lived consumers we show that if the economy is smooth enough equilibria are locally unique for almost all endowments we do so by converting the infinite dimensional fixed point problem stated in terms of prices and commodities into a finite dimensional negishi problem involving individual weights in a social value function by adding artificial fixed factors to utility and production functions we can write the equilibrium conditions equating spending and income for each consumer entirely in terms of time zero factor endowments and derivatives of the social value function

introduction to intertemporal equilibrium theory indeterminacy bifurcations and stability institute of economic research kyoto university yoshida honmachi sakyoku kyoto 606 japannishimura kier kyoto u ac jpthis paper provides an overview of the basic concepts of intertemporal equi librium theory and discusses the frameworks and techniques used in this subject it then goes on to introduce the main themes discussed in the papers included inthis symposium issue journal of economic literature classification numbers c61 d90 o41

comparative statics and perfect foresight in infinite horizon economies does a pure exchange economy with an infinite time horizon have determinate perfect foresight equilibria when there is a finite number of infinitely lived agents equilibria are generically determinate this is not true with overlapping generations of finitely lived agents we ask whether the initial conditions together with the requirement of convergence to a steady state locally determine an equilibrium price path in this framework there are many economies with isolated equilibria many with continua of equilibria and many with no equilibria at all with two or more goods in every period not only can the price level be indeterminate but relative prices as well furthermore such indeterminacy can occur whether or not there is fiat money and whether or not the equilibria are pareto efficient this paper considers whether infinite horizon economies have determinate perfect foresight equilibria this question is of crucial importance if instead equilibria are locally indeterminate not only are we unable to make comparative static predictions but the agents in the model are unable to determine the consequences of unanticipated shocks the idea underlying perfect foresight is that agents expectations should be the actual future sequence predicted by the model if the model does not make determinate predictions the concept of perfect foresight is meaningless we consider two extreme cases the first with a finite number of infinitely lived consumers and the second with an infinite number of finitely lived consumers an overlapping generations model both are models of stationary pure exchange economies no production including the storage of goods between periods can occur these models are unrealistic but are the easiest to study extensions of the results of this paper to models with production infinitely lived assets and mixtures of the two types of consumers are presented by muller and woodford 29 when there is a finite number of infinitely lived consumers we argue that equilibria are generically determinate this is because the effective number of equations determining equilibria is not infinite but equal to the number of agents minus one and must determine the marginal utility of income for all but one agent generically near an equilibrium these equations are independent and exactly determine the unknowns when there are infinitely many overlapping generations this reasoning breaks down an infinite number of equations is not necessarily sufficient to determine

determinacy of equilibrium in an overlapping generations model with heterogeneous agents abstract we study the determinacy of perfect foresight equilibrium near a steady state in an overlapping generations model with production and both altruistic and non altruistic agents having distinct utility functions the proportion of each type of consumer is exogenously given our main results show that when there are positive stationary bequests some standard assumptions on preferences and technology rule out local indeterminacy for any positive value of the proportions in the particular case of a separable utility function for altruistic agents we prove that the determinacy property does not depend on the size of the infinite lived altruistic dynasties journal of economic literature classification numbers c62 d91 o21 o41

introduction to a general equilibrium approach to economic growth abstract endogenous growth theory has had some success in explaining the observed data related to the process of economic growth however the results of the models in this literature are typically very sensitive to their micro economic structure it is therefore important to understand how the growth process behaves under more general specifications of such features as the number of commodities the number and preferences of consumers the factors of production and the financial and information structures in other words valuable insights can be gained by integrating growth theory into the framework of general equilibrium theory the summary of the papers in this volume focuses on seven issues that are crucial to this integration and highlights the contributions of the papers to the resolution of these issues journal of economic literature classification numbers c61 d50 d90 f43 o30 o41

monopolistic competition dynamic inefficiency and asset bubbles abstract we emphasise the importance of the market structure to determine whether dynamic inefficiency is possible in a closed economy we analyse alternative monopolistic competition frameworks where the existence of pure profit involves the presence of an asset market when entry is blockaded dynamic inefficiency is prevented as each firm uses a discount rate higher than the output growth rate in evaluating future profits when entry is free but involves sunk costs we need to distinguish between the possibility of asset bubbles and dynamic inefficiency the condition for the latter being more stringent if entry costs increase with per capita output dynamically inefficient equilibria are possible only when population grows

the economics of indeterminacy in overlapping generations models abstract recent research indicates that there are robust examples of overlapping generations economies in which there are indeterminate equilibria without fiat money and equilibria with more than one dimension of indeterminacy this paper presents simple examples of a stationary pure exchange overlapping generations economy with one good in each period and a representative consumer who lives for three periods in each generation these examples exhibit every possible form of indeterminacy and instability furthermore the parameters of the principal example agree with empirical evidence we use our examples as case studies for analyzing the problems involved in computing the equilibria of such economies

existence uniqueness and stability of equilibrium in an overlapping generations model with productive capital abstract this paper analyzes the existence uniqueness and stability of a steady state equilibrium in an overlapping generations model with productive capital it is shown that for any feasible set of well behaved preferences there exists a production function that satisfies the inada conditions under which the economy experiences global contraction and the steady state equilibrium is characterized by the absence of production and consumption the study establishes a strengthened inada condition which is necessary to preclude global contraction and sufficient conditions for the existence of a unique and globally stable non trivial steady state equilibrium

family labour force participation multinomial logit estimates studies of labour force participation choices are mostly aimed at explaining determinants of participation for individuals the objective of this study is the empirical estimation of the parameters of family participation decisions family participation decisions can be analysed as a choice problem of a family between a finite number of distinct alternatives the appropriate estimation procedure for a model involving choice among multiple discrete alternatives requires a statistical technique different from ordinary least squares in this study i use the multinomial logit model a logit model allows me to explain the probability that a particular participation alternative will be chosen by a family as a function of a set of independent variables it is found that economic variables such as wage rates and wealth play a significant role in affecting the probabilities of choosing a particular labour force participation alternative this study shows that an increase in the market wage for a family member not

stability of equilibria in the overlapping generations model with endogenous labor supply abstract this paper looks at the issue of existence and stability of steady state equilibria in an overlapping generations model with productive capital a la diamond augmented to include endogenous labor supply the paper derives some necessary and sufficient conditions under which a steady state equilibrium is a sink a saddle point or a source under a simple condition on the labor supply elasticity it is also shown that the local stability condition of the standard diamond model can be generalized in order to become a necessary and sufficient condition for the saddle point property of the steady state equilibrium

health and wage a simultaneous equation model with multiple discrete indicators in this article we propose all econometric approach for estimating the simultaneouls effects of health and wages in a structural equations framework in the theoretical works of grossmana 1972a 1972b health is viewed as anl elldogen1oulsly determined capital stock the demand for health should rise with the wage rate as the rate of return to health investment increases with wage onl the other hand better health should raise market productivity and hence wages since health capital is an abstract theoretical concept it can hardly be measured quantitatively however most population surveys include various health indicators these indicators are usually discrete variables in the empirical work of grossman and benham 1974 these qualitative indicators are treated as continuous variables and two stage least squares estimation techniques are used this specification raises various econometric problems see e g goldberger 1964 pp 248 255 domencich and mcfadden 1975 and nerlove and press 1973 a satisfactory specification should take into account the discrete nature of the indicators our specification generalizes the dummy variables simultaneous equations system of heckman 1978 the measurement models of joreskog and goldberger 1975 and is closely related to the models of muthe n 1976 1979 muthen studies full information maximum likelihood procedures for estimation except for very simple cases this does not generally yield feasible or tractable procedures in this article we introduce a tractable procedure for statistical estimation and testing this specification and the estimation procedure is then applied to study the joint dependence of health and wages another departure of our approach from others is that we will test and correct the possible incompatibility of the various health capital indicators in the population surveys one may have subjective health indicators such as self evaluation of health which may reflect different populations perception of health we propose a statistical procedure for testing measurement compatibility and if required for correcting this problem this article is divided into two parts initially we describe the model specification estimation and statistical tests in a general simultaneous equation model with multiple discrete indicators in the second part of the paper we consider specification of a simultaneous equation model for health and wages the model

irreversible capital and the stock market response to shocks in profitability this paper develops a vintage model of capital accumulation to identify the structural linkage between shocks to input or output prices and a firm s stock market value the model accounts for a substantial part of the sample variation in excess returns thus providing evidence for a systematic link between the stock market valuation of firms and the economic factors that affect their profitability the 1973 74 oil shock is shown to have had a strong impact on excess returns firms whose capital consisted of vintages built when energy was relatively cheap were hit the hardest in value copyright 1997 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

disentangling the effect of arthritis on earnings a simultaneous estimate of wage rates and hours worked poor health affects both wage rates and hours of work here we develop a procedure for examining the separate impact of a specific chronic disease arthritis on wages and hours worked and then translate these results into earnings our methodology provides a consistent approach for measuring how a specific chronic disease affects total earnings as well as its component parts we find that arthritis affects wage rates and hours worked differently and the pattern of these effects differs considerably between men and women

economic growth energy intensity and the energy mix abstract this paper explores how changes in energy intensity and the switch to renewables can boost economic growth to do so we implement a dynamic panel data approach on a sample of 134 countries over the period 1960 to 2010 we incorporate a set of control variables related to human and physical capital socio economic conditions policies and institutions which have been widely used in the literature on economic growth given the current state of technology improving energy intensity is growth enhancing at the worldwide level moreover conditional to energy intensity moving from fossil fuels to frontier renewables wind solar wave or geothermic is also positively correlated with growth our results are robust to the specification of the dynamic panel with respect to alternative approaches pooled ols within group or system gmm and to alternative specifications accounting for heterogeneity across countries a set of institutional factors and other technical aspects

sraffian indeterminacy in general equilibrium the indeterminacy claim for competitive price systems made by sraffa 1960 is examined by placing sraffa s work in an intertemporal general equilibrium model we show that indeterminacy occurs at a natural type of equilibrium moreover the presence of linear activities instead of a differentiable technology is crucial and the indeterminacy is constructed as in sraffa by fixing some or all of the economy s aggregate quantities on the other hand an extra condition that some factors have inelastic excess demand is necessary and unlike sraffa s model relative prices must be allowed to vary through time sraffian indeterminacy and the generic finiteness of the number of equilibria are reconciled by showing that indeterminacy occurs at a measure zero set of endowments we use an overlapping generations model to show that these endowments nevertheless arise systematically and that indeterminacy does not occur when relative prices are constant through time near the beginning of his production of commodities by means of commodities 1960 sraffa specifies a system of equations that prices must obey if the capital invested in each sector of an economy is to earn the same rate of profit the system contains one more unknown than equation leading sraffa to conclude that prices and wage and interest rates in particular are indeterminate sraffa s book has since been read as arguing that some outside non economic consideration must therefore set prices and the distribution of income part of the controversy the book has provoked is due to sraffa s apparent agreement with the neoclassical emphasis on optimization and competitive markets the standard sraffian system of equations is nothing other than the first order conditions that hold for price taking profit maximizing firms using linear activities but if sraffa s assumptions are in accord with neoclassical theory how can his assertions of indeterminacy be correct i examine sraffa s indeterminacy argument and his critique of neoclassical economics by embedding his equations in a general equilibrium model as we will see the indeterminacy claim properly interpreted correctly describes the equilibria with strictly positive prices moreover the indeterminacy demonstrated here closely duplicates the indeterminacy sraffa claimed first it is prices alone that are indeterminate i follow sraffa s striking procedure of fixing the quantities of goods produced an infinity of normalized price vectors support a single vector of aggregate quantities second sraffa seemed to claim and his advocates e g robinson 1961 have certainly claimed that his book is a critique of marginal productivity theory correspondingly indeterminacy in the present model hinges on marginal products not being everywhere well defined when there are linear activities with smooth production sets our indeterminacy arguments do not work third the dimension of the indeterminacy i demonstrate matches sraffa s accounting of the dimension of indeterminacy

husband s health and wife s labor supply this paper examines the labor supply response of the wife to deterioration in the husband s health unlike past cross sectional studies responses over time are directly examined through the use of longitudinal data the empirical results suggest that the magnitude and direction of the response depend crucially on the attractiveness of transfers which the family may qualify for when the husband s health deteriorates when no transfers are available the wife increases her market work in order to replace the lost earnings of the husband however as transfers become more attractive the wife begins to reduce her labor supply enabling her to spend more time at home caring for her husband

growth externalities and sunspots abstract in this paper we consider a simple model of neo classical capital accumulation with production externalities in which a continuum of identical infinitely lived agents produce output from a standard stationary neo classical production technology and choose their actions to maximize a discounted sum of single period utilities because of the presence of the externality in production the model exhibits sunspot equilibria

dynamic factor demands and the effects of energy price shocks a dynamic model is used to understand how sharp changes in energy prices affect investment behavior employment and energy use the authors discuss the theory behind their model selection model specifications estimation methods and data list parameter estimates and elasticities for the selected model and describe the simulations they conclude that 1 the data strongly reject the hypothesis of constant returns to scale within their specification of aggregate production 2 the data indicate adjustment costs on labor are small and 3 their results help reconcile some of the conflicting estimates of energy demand elasticities appearing in recent literature 23 references 3 figures 3 tables

a general equilibrium analysis of the 1986 tax reform in spain spain s recent entry into the european economic community eec has been accompanied by a number of economic reforms needed to comply with requirements imposed on a11 member countries a key ingredient of these reforms has been the introduction on i january 1986 of a vaiue added tax vat on consumption as a substitute for a complex range of indirect taxes including a turnover tax applied at every stage of the production process the fiscal reform has posed a number of interesting policy questions for instance one common criticism of the new tax system is that its rates have been chosen too high and will further depress the economy whose oflicial unemployment rate was 22 in 1985 government officials are very concerned however with the effect of the new tax system on public revenues and in turn on the substantial deficit of the public sector which was 8 of gdp in 1985 another current debate centers on whether the new tax system has a detrimental impact on the capital labor ratio due to the retention of social security taxes which are taxes on the use of labor in this paper we use an applied general equilibrium model of the spanish economy to analyze the impacts of the indirect tax reform on relative prices resource allocation and income distribution using the information contained in the social accounting matrix constructed by kehoe et al 1985 in the next section we describe the model placing emphasis on its novel features in

income productivity in china on the role of health this study provides empirical evidence regarding the income productivity of health human capital in china we appeal to concepts from human capital theory to support a basic model that treats health as a form of human capital in the income production process our model examines the economic return at the household level from the health of its individual members we estimate this with a longitudinal sample drawn from the china health and nutrition survey chns allowing us to exploit within variation in health and income to address possible unobservables biasing estimates of the impact of health on income in the simple cross sectional setting household income is strongly influenced by the health of its members particularly in rural areas these findings could have important implications for health and economic policy making aimed at reducing the long standing urban rural economic gap and more comprehensively insuring the rural population against health and economic risk

common currencies vs monetary independence we study the optimal monetary policy in a two country open economy model under two monetary arrangements a multiple currencies controlled by independent policy makers b common currencies with a centralized policy maker our findings suggest that i monetary policy competition leads to higher long term inflation and interest rates with large welfare losses ii the inflation bias and the consequent losses are larger when countries are unable to commit to future policies iii the welfare losses from higher long term inflation dominates the welfare costs of losing the ability to react optimally to shocks

gross substitutability in large square economies abstract this paper investigates the implications of gross substitutability of excess demand functions for the equilibria of exchange economies with countably many goods and arbitrarily many consumers we provide uniqueness theorems for general models we also show that the equilibrium trajectories of dynamic stationary overlapping generations economies satisfy strong turnpike properties in particular we are able to extend gale s characterization of the equilibrium dynamics of the model with one good per period one consumer per generation and two periods of life to models with many goods many consumers and many periods of life

allocation of co2 emissions permits a general equilibrium analysis of policy instruments what are the effects of different ways of allocating co2 emissions permits under a tradable permit scheme numerical simulations show that using the permit revenue to lower existing taxes implies by far the lowest welfare cost but also a large reduction in employment in energy intensive sectors and substantial stranded costs grandfathering the permits compensates owners for losses on stranded investments but comes at a welfare cost and does not mitigate the adjustment imposed on the economy finally distributing the permits according to market shares reduces the degree of sectoral adjustment but also comes at a high welfare cost

health a source of bias in labor supply models the inconsistency of the labor supply estimates using nonexperimental data has led to the costly income maintenance experiments that have taken place in various parts of the country in addition to being costly the analyses of experimental data also have their share of econometric problems 1 both experimental and nonexperimental studies face the problems of sample selection model specification and variable measurement in order to determine what effects the variables of interest have on labor supply all relevant factors must be included one of these control variables namely health is often included in a form which results in biased estimates in this paper we hope to show that the analysis of experimental and nonexperimental labor supply data must carefully address the health variable problem before meaningful estimates can be obtained in general three treatments emerge in the literature no control for health is used a binary variable which we shall call a disability variable is included in the model as an exogenous variable or the disability variable is used as a partitioning criterion to obtain a sample of able bodied men or women the disability variable is often the response to the question does your health prevent you from working altogether or does your health limit the kind or amount of work you could do this study will examine the bias created by each of these approaches and will suggest a method of measurement for health which does not produce biased estimates 2 health and labor supply

expectations learning and the changing relationship between oil prices and the macroeconomy this paper estimates a structural general equilibrium model to investigate the changing relationship between the oil price and macroeconomic variables the oil price through the role of oil in production and consumption affects aggregate demand and supply in the model the assumption of rational expectations is relaxed in favor of learning oil prices therefore affect the economy through an additional channel i e through their effect on the formation of agents beliefs the estimated learning dynamics indicates that economic agents perceptions about the effects of oil prices on the economy have changed over time oil prices were perceived to have large effects on output and inflation in the 1970s but only milder effects after the mid 1980s since expectations play a large role in the determination of output and inflation the effects of oil price increases on expectations can magnify the response of macroeconomic variables to oil price shocks in the estimated model in fact the implied responses of output and inflation to oil price shocks were much more pronounced in the 1970s than in 2008 therefore through the time variation in the impact of oil prices on beliefs the paper can successfully explain the observed weakening of the effects of oil price shocks on real activity and inflation