Template-Type: ReDIF-Article 1.0
Author-Name:  Mohamad B. Karaki
Title:  Oil Prices and State Unemployment Rates
Classification-JEL: F0
Volume:  Volume 39
Issue:  Number 3
Year:  2018
Abstract:  This paper studies the effect of oil price shocks on U.S. state-level unemployment rates. First, using a test of symmetry, I evaluate whether the relationship between oil prices and state unemployment rates is symmetric. I find no evidence against the null of symmetry after accounting for data mining. Second, I use a symmetric structural VAR model to analyze the effect of oil supply shocks, aggregate demand shocks and oil-specific demand shocks on state unemployment. I find that an adverse supply shock triggers increases in unemployment, whereas a positive aggregate demand shock reduces the unemployment rate across most U.S. states. I also show that oil-specific demand shocks have little effect on state unemployment. Finally, I dig into the historical contribution of the various oil shocks to the changes in state unemployment rates during the shale boom period. I find that aggregate demand shocks contributed the most to the change of unemployment.
Handle: RePEc:aen:journl:ej39-3-Karaki
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