Oil price shocks and Japanese macroeconomic developments

Using quarterly data for Japan over the period 1976:I–2008:II within a modelling strategy incorporating information about structural breaks in the variables included to represent the macroeconomic transmission channels, this paper shows that oil price shocks led to a fall in industrial production and higher inflation. However, these effects are only evident in the late 1970s and early 1980s. In more recent episodes of sharp oil price increases, inflationary effects are barely visible, and there is very limited evidence of oil‐induced industrial slowdowns.