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Fuel price shocks and inflation dynamics in Lebanon

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  • Karaki, Mohamad B.
  • El Chaar, Jana

Abstract

This paper examines the inflationary effects of gasoline price shocks in Lebanon, an oil-importing country that is considered highly vulnerable to energy-driven inflation. Using a partially identified Bayesian Vector Autoregressive model, we find that the impact of gasoline price shocks on headline and core inflation is both limited and short-lived. Although prices in housing and utilities, as well as transport, rise sharply on impact, these effects dissipate within a few months. Moreover, aside from these two spending components, gasoline price shocks explain only a modest share of the forecast error variance. The sharp decline in gasoline prices during 2014–2016 also produced modest and transitory effects on inflation. We further examine the impact of diesel price shocks on inflation dynamics and find that their effects are smaller than those of gasoline price shocks.

Suggested Citation

  • Karaki, Mohamad B. & El Chaar, Jana, 2026. "Fuel price shocks and inflation dynamics in Lebanon," Energy Economics, Elsevier, vol. 153(C).
    • Handle: RePEc:eee:eneeco:v:153:y:2026:i:c:s014098832500859x
    DOI: 10.1016/j.eneco.2025.109029
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • Q11 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Aggregate Supply and Demand Analysis; Prices
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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