CAN OPEC CAUSE INFLATION AND RECESSION

This paper addresses an issue that has been the subject of debate in t he media and in academic circles. The issue concerns the effect of hig her oil prices initiated by OPEC on economic activity in OECD countrie s. Results of cointegration tests indicate that there is no long-run r elationship between oil prices and macroeconomic variables in OECD cou ntries. However, causality testing indicates the existence of unidirec tional causality from oil prices to domestic prices and output.