DP184 Competitiveness, Oil Prices and Government Expenditure in the United Kingdom Business Cycle

Author(s): George Alogoskoufis
Publication Date: June 1987
Keyword(s): Business Cycle, Competitiveness, Fluctuations, Oil Prices, United Kingdom
JEL(s): 131, 322, 421, 431
Programme Areas: International Macroeconomics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=184

In this paper I estimate and test a model of the effects of competitiveness, oil prices and government expenditure on output fluctuations in the United Kingdom. The model is based on the distinction between traded and non-traded goods, the latter being produced in both the private and public sectors. The model can account for the properties of the data, insofar as it cannot be rejected by either mis-specification or specification tests. On the basis of the estimates it appears that competitiveness and government expenditure have been equally important independent sources of output fluctuations, both before and after 1973. As one would have expected, however, real oil prices were the most important contributor in the post-1973 period.