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The impact of oil price shocks on inflation: Do asymmetries matter?

Author

Listed:
  • Taner Turan

    (Department of Economics, Gebze Technical University, P.K. 141, 41400, Gebze/Kocaeli, Turkey)

  • Hüseyin A. Özer

    (Department of Economics, Gebze Technical University, P.K. 141, 41400, Gebze/Kocaeli, Turkey)

Abstract

Using cointegration approach and Augmented Phillips Curve framework, this study examines the effects of changes in the global oil prices on the inflation rate for five CEE countries between 1994 and 2018. Our research indicates the existence of cointegration for Czechia, Poland and Slovakia. We find a positive relationship between changes of oil prices and the inflation rate in Poland in the long run. Additionally, it seems that the changes in oil prices impact the inflation rate in the long run for Czechia, Hungary and Poland. In a non-linear model framework cointegration is found in Czechia, Hungary, Poland and Slovenia. Our findings suggest that changes in oil prices significantly affect the inflation rate in Czechia, Hungary and Poland in the long-run and in all countries in the short-run. More importantly, we demonstrate that the short- and long-run asymmetries play a significant role in explaining the dynamics of the inflation rate.

Suggested Citation

  • Taner Turan & Hüseyin A. Özer, 2022. "The impact of oil price shocks on inflation: Do asymmetries matter?," Acta Oeconomica, Akadémiai Kiadó, Hungary, vol. 72(3), pages 271-288, September.
    • Handle: RePEc:aka:aoecon:v:72:y:2022:i:3:p:271-288
    DOI: 10.1556/032.2022.00022
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    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • Q31 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Demand and Supply; Prices

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