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Is Oil Price Still Driving Inflation?

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  • Patricia Renou-Maissant

Abstract

In this paper, we empirically investigate the effects of oil price changes on inflation over the period 1991-2016 for eight industrial countries: the United States, Canada, Japan, Australia, Germany, France, Italy, and the UK. In doing so, we use an oil-augmented Phillips curve with unobserved components and we consider time-varying coefficients. The results show that even over a period of low and stable inflation, oil prices play a significant role in the dynamics of inflation. In all the countries except Germany, oil pass-through into inflation increased from the early 2000s up until the global financial crisis. In the United States it has nearly doubled in the last fifteen years. These findings suggest that central banks must continue to monitor oil prices closely.

Suggested Citation

  • Patricia Renou-Maissant, 2019. "Is Oil Price Still Driving Inflation?," The Energy Journal, International Association for Energy Economics, vol. 0(Number 6).
    • Handle: RePEc:aen:journl:ej40-6-renou-maissant
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    Cited by:

    1. Chelghoum, Amirouche & Boumimez, Fayçal & Alsamara, Mouyad, 2023. "Asymmetric effects of oil price shocks on the demand for money in Algeria," The Quarterly Review of Economics and Finance, Elsevier, vol. 89(C), pages 1-11.
    2. Sheng, Xin & Marfatia, Hardik A. & Gupta, Rangan & Ji, Qiang, 2023. "The non-linear response of US state-level tradable and non-tradable inflation to oil shocks: The role of oil-dependence," Research in International Business and Finance, Elsevier, vol. 64(C).
    3. Mustafa Kocoglu, 2023. "Drivers of inflation in Turkey: a new Keynesian Phillips curve perspective," Economic Change and Restructuring, Springer, vol. 56(4), pages 2825-2853, August.
    4. de Mendonça, Helder Ferreira & Garcia, Pedro Mendes, 2023. "Effects of oil shocks and central bank credibility on price diffusion," International Review of Economics & Finance, Elsevier, vol. 84(C), pages 304-317.
    5. Huang, Xuan & Liu, Xueyong, 2022. "The time-frequency evolution of multidimensional relations between global oil prices and China's general price level," Energy, Elsevier, vol. 244(PA).
    6. Castillo, Paul & Montoro, Carlos & Tuesta, Vicente, 2020. "Inflation, oil price volatility and monetary policy," Journal of Macroeconomics, Elsevier, vol. 66(C).
    7. Degiannakis, Stavros & Filis, George, 2023. "Oil price assumptions for macroeconomic policy," Energy Economics, Elsevier, vol. 117(C).
    8. Jawadi, Fredj & Cheffou, Abdoulkarim Idi & Bu, Ruijun, 2023. "Revisiting the linkages between oil prices and macroeconomy for the euro area: Does energy inflation still matter?," Energy Economics, Elsevier, vol. 127(PA).

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    JEL classification:

    • F0 - International Economics - - General

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