Oil Shocks And External Adjustment

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Executive Summary

In reaction to the oil crises of the 1970s and early 1980s, as well as the more recent run-up in oil prices that started in 2003, the oil component of the U.S. trade balance consistently deteriorated. However, the link between oil prices and the overall goods trade balance appears more elusive. For example, although the overall trade deficit has expanded as oil prices have risen in recent years, it showed some improvement after both the first and second OPEC oil price shocks.

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