Gas prices and recessions, it takes two to tango.

I found this great post by James Hamilton of Econbrowser which discusses the correlation between gas prices and recessions. Mr. Hamilton provides data which shows that a sharp rise in gas prices precedes recessions. The article notes that the recent rise in oil prices probably isn't enough to cause a double dip on its own, however the recent recession was exacerbated by the steep rise in prices immediately before the crash. Hamilton concludes that the high oil prices are a drag on the economy but are not bad enough to cause another dip on there own.

1 comment:

Dr. Tufte said...

I wrote on another comment that I pretty much like every bit of research Hamilton has done except his stuff on oil prices.

The last 2 years have made me doubt that, and I've been spending more time reading his stuff.