Abstract
We study the impact of fluctuations in global oil prices on domestic inflation using an unbalanced panel of 72 advanced and developing economies over the period from 1970 to 2015. We find that a 10% increase in global oil inflation increases, on average, domestic inflation by about 0.4 percentage points on impact, with the effect vanishing after two years and being similar between advanced and developing economies. We also find that the effect is asymmetric, with positive oil price shocks having a larger effect than negative ones. The impact of oil price shocks, however, has declined over time due in large part to a more credible monetary policy and less reliance on energy imports. We further examine the transmission channels of oil price shocks on domestic inflation during the recent decades, by making use of a monthly dataset from 2000 to 2015. The results suggest that the share of transport in the CPI basket and energy subsidies are the most robust factors in explaining cross-country variations in the effects of oil price shocks during the period.
| Original language | English |
|---|---|
| Pages (from-to) | 71-96 |
| Number of pages | 26 |
| Journal | Journal of International Money and Finance |
| Volume | 82 |
| DOIs | |
| Publication status | Published - 2018 Apr 1 |
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All Science Journal Classification (ASJC) codes
- Finance
- Economics and Econometrics
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Oil prices and inflation dynamics : Evidence from advanced and developing economies. / Choi, Sangyup; Furceri, Davide; Loungani, Prakash; Mishra, Saurabh; Poplawski-Ribeiro, Marcos.
In: Journal of International Money and Finance, Vol. 82, 01.04.2018, p. 71-96.Research output: Contribution to journal › Article
TY - JOUR
T1 - Oil prices and inflation dynamics
T2 - Evidence from advanced and developing economies
AU - Choi, Sangyup
AU - Furceri, Davide
AU - Loungani, Prakash
AU - Mishra, Saurabh
AU - Poplawski-Ribeiro, Marcos
PY - 2018/4/1
Y1 - 2018/4/1
N2 - We study the impact of fluctuations in global oil prices on domestic inflation using an unbalanced panel of 72 advanced and developing economies over the period from 1970 to 2015. We find that a 10% increase in global oil inflation increases, on average, domestic inflation by about 0.4 percentage points on impact, with the effect vanishing after two years and being similar between advanced and developing economies. We also find that the effect is asymmetric, with positive oil price shocks having a larger effect than negative ones. The impact of oil price shocks, however, has declined over time due in large part to a more credible monetary policy and less reliance on energy imports. We further examine the transmission channels of oil price shocks on domestic inflation during the recent decades, by making use of a monthly dataset from 2000 to 2015. The results suggest that the share of transport in the CPI basket and energy subsidies are the most robust factors in explaining cross-country variations in the effects of oil price shocks during the period.
AB - We study the impact of fluctuations in global oil prices on domestic inflation using an unbalanced panel of 72 advanced and developing economies over the period from 1970 to 2015. We find that a 10% increase in global oil inflation increases, on average, domestic inflation by about 0.4 percentage points on impact, with the effect vanishing after two years and being similar between advanced and developing economies. We also find that the effect is asymmetric, with positive oil price shocks having a larger effect than negative ones. The impact of oil price shocks, however, has declined over time due in large part to a more credible monetary policy and less reliance on energy imports. We further examine the transmission channels of oil price shocks on domestic inflation during the recent decades, by making use of a monthly dataset from 2000 to 2015. The results suggest that the share of transport in the CPI basket and energy subsidies are the most robust factors in explaining cross-country variations in the effects of oil price shocks during the period.
UR - http://www.scopus.com/inward/record.url?scp=85044641804&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=85044641804&partnerID=8YFLogxK
U2 - 10.1016/j.jimonfin.2017.12.004
DO - 10.1016/j.jimonfin.2017.12.004
M3 - Article
AN - SCOPUS:85044641804
VL - 82
SP - 71
EP - 96
JO - Journal of International Money and Finance
JF - Journal of International Money and Finance
SN - 0261-5606
ER -