AN EMPIRICAL-ANALYSIS OF OIL PRICE SHOCKS IN THE INTERWAR PERIOD

This paper presents results that indicate that oil price shocks were e conomically important in explaining movements in industrial production , and, to a lesser degree, movements in wholesale prices in the period between World Wars I and II. The framework for analysis is a vector a utoregressive model estimated using monthly data over 1924.2-38.6 that employs a financial intermediation variable, a measure of relative oi l prices, and other variables typically found in small macroeconomic m odels. The impact of oil price shocks is evaluated through computation of variance decompositions and an historical decomposition over the 1 929:9-38:6 period.