Category Archives: international

Sovereign Debt Crisis or Oil in the Euro Area Recession of 2011-13

Conventional wisdom (sovereign debt crisis and austerity measures) or oil as cause? Steven Kopits says oil:

The cause of a brutal recession in Europe during Q4 2011 – Q1 2013 remains unexplained in policy circles. Or more precisely, the proposed explanation is less than compelling. …  oil prices once again returned to high levels, with Brent regularly in the $100 – 115 range. With this, oil consumption in both the US and Europe began to decline, and such declines in oil consumption due to high prices — normally characterized as an oil shock — invariably leads to recession. … to suggest a Greek financial crisis could cause a recession in Europe is not entirely convincing. Greece’s GDP is all of 2% of that of the EU. It would be like a financial crisis in Indiana taking down the US economy. Conceivable, but it does not jump out at you.

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