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The impact of oil price changes on Spanish and euro area consumer price inflation

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  • Álvarez, Luis J.
  • Hurtado, Samuel
  • Sánchez, Isabel
  • Thomas, Carlos

Abstract

This paper assesses the impact of oil price changes on Spanish and euro area consumer price inflation. We find that the inflationary effect of oil price changes in both economies is limited, even though crude oil price fluctuations are a major driver of inflation variability. The impact on Spanish inflation is found to be somewhat higher than in the euro area. In both economies, direct effects have increased in the last decade, reflecting the higher expenditure share of households on refined oil products, whereas indirect and second-round effects seem to be losing importance.

Suggested Citation

  • Álvarez, Luis J. & Hurtado, Samuel & Sánchez, Isabel & Thomas, Carlos, 2011. "The impact of oil price changes on Spanish and euro area consumer price inflation," Economic Modelling, Elsevier, vol. 28(1), pages 422-431.
  • Handle: RePEc:eee:ecmode:v:28:y:2011:i:1:p:422-431 DOI: 10.1016/j.econmod.2010.08.006
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    More about this item

    Keywords

    Oil prices; Consumer price inflation; Spanish and euro area inflation; DSGE models;

    JEL classification:

    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications

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