scholarly journals Inflation Expectations and the Pass-Through of Oil Prices

2021 ◽  
pp. 1-26
Author(s):  
Knut Are Aastveit ◽  
Hilde C. Bjørnland ◽  
Jamie L. Cross
Keyword(s):  
Oil Prices ◽  
Structural Var ◽  
Oil Price ◽  
Inflation Expectations ◽  
Oil Price Shocks ◽  
Price Shocks ◽  
Demand And Supply ◽  
The Great Recession ◽  
Oil Market ◽  
Pass Through

Abstract Inflation expectations and the associated pass-through of oil price shocks depend on demand and supply conditions underlying the global oil market. We establish this result using a structural VAR model of the global oil market that jointly identifies transmissions of oil demand and supply shocks through real oil prices to both expected and actual inflation. We demonstrate that economic activity shocks have a significantly longer lasting effect on inflation expectations and actual inflation than other types of real oil price shocks, and resolve disagreements around the role of oil prices in explaining the missing deflation puzzle of the Great Recession.

Exploring the inflationary effect of oil price in the US

2019 ◽  
Vol 13 (1) ◽  
pp. 60-76 ◽  
Author(s):  
Amine Lahiani
Keyword(s):  
Growth Rate ◽  
Structural Breaks ◽  
Oil Prices ◽  
Oil Price ◽  
Inflation Expectations ◽  
Oil Price Shocks ◽  
Price Shocks ◽  
Content Type ◽  
The Us ◽  
The Relationship

PurposeThe purpose of this paper is to explore the effect of oil price shocks on the US Consumer Price Index over the monthly period from 1876:01 to 2014:04.Design/methodology/approachThe author uses the Bai and Perron (2003) structural break test to split the data sample into sub-periods delimited by the computed break dates. Afterwards, the author uses the quantile treatment effects over the full sample and then, by including sub-periods dummies to accommodate the selected structural breaks that drive the relationship between inflation and oil price growth.FindingsThe findings include a decreased transmission effect of oil price changes on inflation in recent years; a varied elasticity of inflation to the growth rate of oil prices across the distribution; and, finally, evidence of asymmetry in the relationship between the growth rate of oil prices and inflation, with a higher transmission mechanism for decreasing rather than increasing oil prices.Practical implicationsPolicymakers should remain alert to monitoring potential inflation increases and should take precautionary measures to anchor inflation expectations, because inflation reacts differently to positive and negative oil price shocks. Moreover, authorities should consider the asymmetric reaction of inflation to oil price shocks to adopt an appropriate monetary policy strategy to achieve the price stability target.Originality/valueThe paper used a quantile regression model with structural breaks, which has not yet been used in the literature.

scholarly journals HOW DO INTERNATIONAL STOCK MARKETS RESPOND TO OIL DEMAND AND SUPPLY SHOCKS?

2013 ◽  
Vol 18 (8) ◽  
pp. 1657-1682 ◽  
Author(s):  
Jochen H. F. Güntner
Keyword(s):  
Stock Market ◽  
Stock Returns ◽  
Stock Markets ◽  
Structural Var ◽  
Oil Price ◽  
Oil Price Shocks ◽  
Price Shocks ◽  
Demand And Supply ◽  
Supply Shocks ◽  
Oil Demand

Building on Kilian and Park's (2009) structural VAR analysis of the effects of oil demand and supply shocks on the U.S. stock market, this paper focuses on the differences and commonalities of stock price responses in oil exporting and importing economies in 1974–2011. Structural oil price shocks add to our understanding of the 2008 stock market crash. I find that unexpected reductions in world oil supply do not affect stock returns in any of six OECD countries. Although an increase in global aggregate demand consistently raises oil prices and cumulative real stock returns, the effect is more persistent for oil exporters. Other, e.g., precautionary oil demand shocks have a detrimental impact on stock markets in oil-importing countries, a statistically insignificant effect for Canada, and a significantly positive effect for Norway. Oil price shocks account for a larger share of the variation in aggregate international stock returns than in national stock returns.

scholarly journals Oil price change and Economy relationship :A global review using a nonlinear dynamic model for MENA Countries

2020 ◽  
Vol 24 (2) ◽  
Author(s):  
Essahbi Essaadi ◽  
Rafik Jbir
Keyword(s):  
Price Change ◽  
Oil Prices ◽  
Structural Var ◽  
Oil Price ◽  
Time Varying ◽  
Oil Price Shocks ◽  
Nonlinear Dynamic Model ◽  
Price Shocks ◽  
Mena Countries ◽  
Macroeconomic Effects

This paper studies the macroeconomic effects of oil price shocks in a selection of MENA countries. The oil price shock is identified by assuming that an individual country's performance does not affect world oil prices. We put particular emphasis on the time-varying relationship between oil prices and macroeconomic variables and implement their approach in a Time-Varying Structural VAR model (TV-SVAR) framework. The main findings are that the macroeconomic effects of oil price shocks have evolved over time in MENA countries. Interestingly, however, we do not find a lot of heterogeneity among the MENA countries they consider, even though their list includes both net oil exporters (Algeria, Bahrain, Iran, Kuwait, Saudia Arabia) and net oil importers (Turkey and Tunisia) 

The impact of oil price shocks on Turkish sovereign yield curve

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Oğuzhan Çepni ◽  
Selçuk Gül ◽  
Muhammed Hasan Yılmaz ◽  
Brian Lucey
Keyword(s):  
Yield Curve ◽  
Structural Var ◽  
Oil Price ◽  
Inflation Expectations ◽  
Oil Price Shocks ◽  
Price Shocks ◽  
Demand Shocks ◽  
Content Type ◽  
Identification Scheme ◽  
The Impact

PurposeThis paper aims to investigate the impact of oil price shocks on the Turkish sovereign yield curve factors.Design/methodology/approachTo extract the latent factors (level, slope and curvature) of the Turkish sovereign yield curve, we estimate conventional Nelson and Siegel (1987) model with nonlinear least squares. Then, we decompose oil price shocks into supply, demand and risk shocks using structural VAR (structural VAR) models. After this separation, we apply Engle (2002) dynamic conditional correlation GARCH (DCC-GARCH (1,1)) method to investigate time-varying co-movements between yield curve factors and oil price shocks. Finally, using the LP (local projections) proposed by Jorda (2005), we estimate the impulse-response functions to examine the impact of different oil price shocks on yield curve factors.FindingsOur results demonstrate that the various oil price shocks influence the yield curve factors quite differently. A supply shock leads to a statistically significant increase in the level factor. This result shows that elevated oil prices due to supply disruptions are interpreted as a signal of a surge in inflation expectations since the cost channel prevails. Besides, unanticipated demand shocks have a positive impact on the slope factor as a result of the central bank policy response for offsetting the elevated inflation expectations. Finally, a risk shock is associated with a decrease in the curvature factor indicating that risk shocks influence the medium-term bonds due to the deflationary pressure resulting from depressed economic conditions.Practical implicationsOur results provide new insights to understand the driving forces of yield curve movements induced by various oil shocks to formulate appropriate policy responses.Originality/valueThe study contributes to the literature by two main dimensions. First, the recent oil shock identification scheme of Ready (2018) is modified using the “geopolitical oil price risk index” to capture the changes in the risk perceptions of oil markets driven by geopolitical tensions such as terrorism and conflicts and sanctions. The modified identification scheme attributes more power to demand shocks in explaining the variation of the oil price compared to that of the baseline scheme. Second, it provides recent evidence that distinguishes the impact of oil demand and supply shocks on Turkey's yield curve.

scholarly journals Monetary policy and the effect of the oil prices pass-through to inflation

2019 ◽  
Vol 5 (3) ◽  
pp. 211-219
Author(s):  
Philipp Kartaev ◽  
Ilya Medvedev
Keyword(s):  
Monetary Policy ◽  
Inflation Targeting ◽  
Dynamic Models ◽  
Oil Prices ◽  
Oil Price ◽  
Oil Price Shocks ◽  
Price Shocks ◽  
Policy Regime ◽  
Pass Through ◽  
The Impact

The paper examines the impact of oil price shocks on inflation, as well as the impact of the choice of the monetary policy regime on the strength of this influence. We used dynamic models on panel data for the countries of the world for 2000–2017. It is shown that the impact of changes in oil prices on inflation is carried out predominantly through the channel of exchange rate. The paper demonstrates the influence of the transition to inflation targeting on the nature of the relationship between oil price shocks and inflation. This effect is asymmetrical: during periods of rising oil prices, inflation targeting reduces the effect of the oil prices pass-through, limiting the negative effects of shock. During periods of decline in oil prices, this monetary policy regime, in contrast, contributes to a stronger pass-through, helping to reduce inflation.

Monetary policy and the effect of the transfer of oil prices to inflation

2020 ◽  
pp. 41-50
Author(s):  
Ph. S. Kartaev ◽  
I. D. Medvedev
Keyword(s):  
Monetary Policy ◽  
Inflation Targeting ◽  
Dynamic Models ◽  
Oil Prices ◽  
Oil Price ◽  
Oil Price Shocks ◽  
Negative Effects ◽  
Price Shocks ◽  
Policy Regime ◽  
The Impact

The paper examines the impact of oil price shocks on inflation, as well as the impact of the choice of the monetary policy regime on the strength of this influence. We used dynamic models on panel data for the countries of the world for the period from 2000 to 2017. It is shown that mainly the impact of changes in oil prices on inflation is carried out through the channel of exchange rate. The paper demonstrates the influence of the transition to inflation targeting on the nature of the relationship between oil price shocks and inflation. This effect is asymmetrical: during periods of rising oil prices, inflation targeting reduces the effect of the transfer of oil prices, limiting negative effects of shock. During periods of decline in oil prices, this monetary policy regime, in contrast, contributes to a stronger transfer, helping to reduce inflation.

scholarly journals Oil price pass-through into inflation in Spain at national and regional level

SERIEs ◽  
2020 ◽  
Vol 11 (4) ◽  
pp. 561-583
Author(s):  
Ligia Topan ◽  
César Castro ◽  
Miguel Jerez ◽  
Andrés Barge-Gil
Keyword(s):  
Econometric Models ◽  
Regional Level ◽  
Oil Price ◽  
Oil Price Shocks ◽  
Price Shocks ◽  
Energy Component ◽  
Pass Through ◽  
The Relationship

AbstractOil price showed sharp fluctuations in recent years which revived the interest in its effect on inflation. In this paper, we discuss the relationship between oil price and inflation in Spain, at national and regional levels, and making the distinction between energy and non-energy inflation. To this end, we fit econometric models to measure the effect of oil price shocks on inflation and to predict them under different scenarios. Our results show that almost half of the volatility of changes in total inflation is explained by changes in oil price. As could be expected, the energy component of inflation drives this effect. We also find that, under the most likely scenarios, 1-year ahead total inflation will be moderate, with relevant differences across regions.

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