Can OPEC cause inflation and recession?

This paper addresses an issue that has been the subject of debate in the media and in academic circles. The issue concerns the effect of higher oil prices initiated by OPEC on economic activity in OECD countries. Results of cointegration tests indicate that there is no long-run relationship between oil prices and macroeconomic variables in OECD countries. However, causality testing indicates the existence of unidirectional causality from oil prices to domestic prices and output. (author)