Oil prices and inflation dynamics: Evidence from advanced and developing economies

Choi, Sangyup; Furceri, Davide; Loungani, Prakash; Mishra, Saurabh; Poplawski-Ribeiro, Marcos

doi:10.1016/j.jimonfin.2017.12.004

Cited by 251 publications

(120 citation statements)

References 28 publications

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“…For instance, (Castro, Jiménez-Rodríguez, Poncela, & Senra, 2017) found that oil price shocks worsen inflation in European economies. Choi et al (2018) also discovered a similar result with an asymmetric effect in different developed and developing economies. Theoretically, it is justified that an unexpected increase in oil prices forces the customers to substantially reduce the expenditure on non-energy goods and services, offsetting the effect.…”

Section: Discussionsupporting

confidence: 59%

Measuring the Impact of Oil Prices and Exchange Rate Shocks on Inflation: Evidence from India

Sharma

Rishad

Gupta

2019

EJBE

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The purpose of this study is to examine the long-run and short-run impact of crude oil price and exchange rate shocks on domestic inflation in India within the framework of the Autoregressive Distributed Lag (ARDL) model. The results show that the exchange rate and oil price shocks significantly influence domestic inflation during the study period (April 1994 to February 2018. Further, the breakpoint unit root test revealed the severe impact of the 2008 financial crisis on inflation in India. The findings show that any move to scale down fuel subsidies will escalate cost-push inflation severely, as the country is an energy-dependent economy. So, policymakers shall stabilise the impact of these shocks through suitable monetary policy actions.

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Section: Discussionsupporting

confidence: 59%

Measuring the Impact of Oil Prices and Exchange Rate Shocks on Inflation: Evidence from India

Sharma

Rishad

Gupta

2019

EJBE

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“…Following this strand of the literature, many studies provide evidence that the adoption of inflation target (IT) is associated with an improvement in overall economic performance (Bernanke and Mishkin (1997); Svensson (1997)) and has even attenuated the oil pass-through (Mishkin (2007)). A more recent literature, however, finds that the inflation targeting regime is not a major determinant of the degree of pass-through (see Choi, et al (2018)).…”

Section: Introductionmentioning

confidence: 99%

“…Indeed, it is proposed that improved monetary policy may account for a part of the decline in the oil pass-through (see Otker, et al (2009) or Choi, et al (2018)). In particular, the better conduct of monetary policy has increase credibility: by better anchoring inflation expectations, an unexpected increase in inflation -due to events such as oil price shocks-does not lead to a change in inflation expectations.…”

Section: Introductionmentioning

confidence: 99%

Inflation target and (a)symmetries in the oil price pass-through to inflation

López-Villavicencio

Pourroy

2019

Energy Economics

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In this paper we employ state-space models to estimate the pass-through of oil price changes to consumer prices for a large sample of countries from 1970 to 2017. By controlling for self-selection bias and endogeneity and allowing for different responses to positive and negative price changes, we asses the differences between explicit inflation targeting (IT) countries and a control group. Surprisingly perhaps, our results suggest that the pass-through is higher for IT countries. Our main contribution is to show that these is mainly due to IT countries having a significant higher pass-through than non-IT countries when the oil price decreases: a 10% drop in oil price leads about a 0.11% drop in inflation in ITers (of which 4pp are explained by the monetary regime). Importantly, we show that adopting IT reduces the asymmetry of the pass-through. We run several robustness checks and conclude that falling oil prices are more welcomed by the central banks with an IT framework, in particular during deflationary episodes or when inflation is above the target. JEL Classification: E31; E42; Q43.

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“…Salisu et al (2017), reports a positive relationship between oil price and inflation and the impact of oil prices on inflation is greater for the oil importing countries when compared with the oil exporting countries. Choi et al (2018), using an unbalanced panel of 72 countries, suggests a positive relation between oil prices and inflation. Choi et al (2018), find that a 10% change in oil prices affects the inflation by 0.4% on average in same direction.…”

Section: Literature Reviewmentioning

confidence: 97%

“…Choi et al (2018), using an unbalanced panel of 72 countries, suggests a positive relation between oil prices and inflation. Choi et al (2018), find that a 10% change in oil prices affects the inflation by 0.4% on average in same direction.…”

Section: Literature Reviewmentioning

confidence: 97%

Untitled

2019

IJEFR

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In this paper, the link between energy prices and price level is investigated from a historical perspective for the case of Ottoman Empire during the period 1885-1914. Although the unit root test results revealed that none of the variables are integrated of second or higher order, the findings of the unit root tests were conflicting. Therefore, to investigate the dynamic relations between energy prices and inflation, ARDL approach to cointegration is employed. The results of the bounds tests showed that energy prices and CPI were cointegrated. Furthermore, ARDL long-run results showed that a 1% change in inflation causes a 0.85% change in energy prices in same direction.

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Oil prices and inflation dynamics: Evidence from advanced and developing economies

Cited by 251 publications

References 28 publications

Measuring the Impact of Oil Prices and Exchange Rate Shocks on Inflation: Evidence from India

Measuring the Impact of Oil Prices and Exchange Rate Shocks on Inflation: Evidence from India

Inflation target and (a)symmetries in the oil price pass-through to inflation

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