Energy prices and aggregate economic activity: an interpretive survey

In this paper, we survey the theory and evidence linking fluctuations in energy prices to aggregate economic activity. We then briefly examine the implications of this research for both monetary policy and energy policy in response to oil price shocks. Research seems to provide relatively reliable guidance for monetary policy. Because the precise channels through which oil price shocks affect economic activity are only partially known, however, research offers less guidance about how energy policy should cope with oil price shocks.