IDEAS home Printed from https://ideas.repec.org/a/eee/ecmode/v43y2014icp67-74.html
   My bibliography  Save this article

Pass-through of oil prices to domestic prices: Evidence from an oil-hungry but oil-poor emerging market

Author

Listed:
  • Dedeoğlu, Dinçer
  • Kaya, Hüseyin

Abstract

This paper aims to investigate the changes in the impact of world oil prices on consumer and producer prices in Turkey, an import dependent country in terms of crude oil and oil petroleum products. According to many researchers, the oil price pass-through to domestic prices has been decreasing recently. We estimate a recursive VAR model on rolling windows to evaluate the changes in the pass-through of oil prices to domestic prices. For the period 1990–2012, we identify an increasing trend in the pass-through of oil prices to domestic prices in Turkey. The increasing pass-through may be attributed to the changes in relative prices: As oil becomes more important in the overall cost structure, firms become more responsive to its price. The results also suggest that the impact of oil prices on producer prices is almost two times higher than the impact on consumer prices. Moreover, the gap between the oil price pass-through to producer prices and the pass-through to consumer prices increased during this period.

Suggested Citation

  • Dedeoğlu, Dinçer & Kaya, Hüseyin, 2014. "Pass-through of oil prices to domestic prices: Evidence from an oil-hungry but oil-poor emerging market," Economic Modelling, Elsevier, vol. 43(C), pages 67-74.
  • Handle: RePEc:eee:ecmode:v:43:y:2014:i:c:p:67-74
    DOI: 10.1016/j.econmod.2014.07.038
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0264999314002946
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Alan S. Blinder & Jeremy B. Rudd, 2012. "The Supply-Shock Explanation of the Great Stagflation Revisited," NBER Chapters,in: The Great Inflation: The Rebirth of Modern Central Banking, pages 119-175 National Bureau of Economic Research, Inc.
    2. Etsuro Shioji & Taisuke Uchino, 2011. "Pass-Through of Oil Prices to Japanese Domestic Prices," NBER Chapters,in: Commodity Prices and Markets, East Asia Seminar on Economics, Volume 20, pages 155-189 National Bureau of Economic Research, Inc.
    3. Jose de Gregorio & Oscar Landerretche & Christopher Neilson, 2007. "Another Pass-Through Bites the Dust? Oil Prices and Inflation," ECONOMIA JOURNAL, THE LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION - LACEA, vol. 0(Spring 20), pages 155-208, January.
    4. Olivier J. Blanchard & Jordi Gali, 2007. "The Macroeconomic Effects of Oil Shocks: Why are the 2000s So Different from the 1970s?," NBER Working Papers 13368, National Bureau of Economic Research, Inc.
    5. LeBlanc, Michael & Chinn, Menzie David, 2004. "Do High Oil Prices Presage Inflation? The Evidence from G-5 Countries," Santa Cruz Center for International Economics, Working Paper Series qt9rr929sm, Center for International Economics, UC Santa Cruz.
    6. Stephen P. A. Brown & David B. Oppedahl & Mine K. Yücel, 1995. "Oil prices and inflation," Working Papers 9510, Federal Reserve Bank of Dallas.
    7. Juthathip Jongwanich & Donghyun Park, 2011. "Inflation in developing Asia: pass‐through from global food and oil price shocks," Asian-Pacific Economic Literature, Asia Pacific School of Economics and Government, The Australian National University, vol. 25(1), pages 79-92, May.
    8. Hakan Kara & Fethi ÃÄünç, 2008. "Inflation Targeting and Exchange Rate Pass-Through: The Turkish Experience," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 44(6), pages 52-66, November.
    9. Dibooglu, Sel & Kibritcioglu, Aykut, 2004. "Inflation, output growth, and stabilization in Turkey, 1980-2002," Journal of Economics and Business, Elsevier, vol. 56(1), pages 43-61.
    10. Ben S. Bernanke & Mark Gertler & Mark Watson, 1997. "Systematic Monetary Policy and the Effects of Oil Price Shocks," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 28(1), pages 91-157.
    11. Valcarcel, Victor J. & Wohar, Mark E., 2013. "Changes in the oil price-inflation pass-through," Journal of Economics and Business, Elsevier, vol. 68(C), pages 24-42.
    12. Berument, Hakan & Taşçı, Hakan, 2002. "Inflationary effect of crude oil prices in Turkey," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 316(1), pages 568-580.
    13. Hooker, Mark A, 2002. "Are Oil Shocks Inflationary? Asymmetric and Nonlinear Specifications versus Changes in Regime," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 34(2), pages 540-561, May.
    14. Jonathan McCarthy, 2007. "Pass-Through of Exchange Rates and Import Prices to Domestic Inflation in Some Industrialized Economies," Eastern Economic Journal, Eastern Economic Association, vol. 33(4), pages 511-537, Fall.
    15. Taylor, John B., 2000. "Low inflation, pass-through, and the pricing power of firms," European Economic Review, Elsevier, vol. 44(7), pages 1389-1408, June.
    16. Olivier J. Blanchard & Jordi Galí, 2007. "The Macroeconomic Effects of Oil Price Shocks: Why are the 2000s so different from the 1970s?," NBER Chapters,in: International Dimensions of Monetary Policy, pages 373-421 National Bureau of Economic Research, Inc.
    17. repec:pri:cepsud:176blinder is not listed on IDEAS
    18. Marco Rossi & Daniel Leigh, 2002. "Exchange Rate Pass-Through in Turkey," IMF Working Papers 02/204, International Monetary Fund.
    19. Celasun, Oya, 1998. "The 1994 currency crisis in Turkey," Policy Research Working Paper Series 1913, The World Bank.
    20. Erdem Basci & Özgür Özel & Cagri Sarikaya, 2008. "The monetary transmission mechanism in Turkey: new developments," BIS Papers chapters,in: Bank for International Settlements (ed.), Transmission mechanisms for monetary policy in emerging market economies, volume 35, pages 475-499 Bank for International Settlements.
    21. Chen, Shiu-Sheng, 2009. "Oil price pass-through into inflation," Energy Economics, Elsevier, vol. 31(1), pages 126-133, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. repec:ebl:ecbull:eb-17-00609 is not listed on IDEAS
    2. repec:gam:jsusta:v:10:y:2018:i:4:p:1080-:d:139614 is not listed on IDEAS
    3. Salisu, Afees A. & Isah, Kazeem O., 2018. "Predicting US inflation: Evidence from a new approach," Economic Modelling, Elsevier, vol. 71(C), pages 134-158.
    4. Salisu, Afees A. & Ademuyiwa, Idris & Isah, Kazeem O., 2018. "Revisiting the forecasting accuracy of Phillips curve: The role of oil price," Energy Economics, Elsevier, vol. 70(C), pages 334-356.
    5. Modugno, Michele & Soybilgen, Barış & Yazgan, Ege, 2016. "Nowcasting Turkish GDP and news decomposition," International Journal of Forecasting, Elsevier, vol. 32(4), pages 1369-1384.
    6. Salisu, Afees A. & Isah, Kazeem O., 2018. "Predicting US inflation: Evidence from a new approach," Economic Modelling, Elsevier, vol. 71(C), pages 134-158.
    7. Tural Karimli & Nigar Jafarova & Heyran Aliyeva & Salman Huseynov, 2016. "Oil Price Pass-Through into Inflation: The Evidence from Oil Exporting Countries," IHEID Working Papers 01-2016, Economics Section, The Graduate Institute of International Studies.
    8. repec:eee:riibaf:v:41:y:2017:i:c:p:247-259 is not listed on IDEAS

    More about this item

    Keywords

    Oil prices; Domestic prices; Pass-through;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ecmode:v:43:y:2014:i:c:p:67-74. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu). General contact details of provider: http://www.elsevier.com/locate/inca/30411 .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.