Energy Price Shocks and Regional Output and Employment

This paper assesses the importance of energy price shocks to short-term fluctuations in state output and employment. In one set of cross-state regressions, the positive effects of energy production are compared with the negative effects of energy used in industrial production during the 1978-80 period of rising energy prices and the 1985-87 period of falling energy prices. A separate regression compares the effect of energy prices and macroeconomic stabilization policy on economic performance in energy-producing and nonproducing states. Overall, monetary policy appears to be more important than energy prices in explaining relative state economic performance.