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EMF OP 43: Crude Oil Prices and U.S. Economic Performance: Where Does the Asymmetry Reside?

Sustained decreases in crude oilprices appear to affect the U.S. economy differently than sustainedincreases. This paper shows that a significant part of the observedasymmetry is due to the adjustments within the energy sector and notwithin the rest of the economy. In particular, sustained decrease inpetroleum product or general energy prices do not appear to havequalitatively different macroeconomic impacts than do sustained priceincreases. The singular focus on crude oil price changes in previousstudies is misplaced. Moreover the 1986 oil price collapse did notoperate in isolation for other important events. As crude oil pricesfell in this period, other factors caused a major devaluation of theU.S. dollar that had potentially important effects on the U.S. economy.