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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, , vol. 40(6), pages 199-220, November.
    • Handle: RePEc:sae:enejou:v:40:y:2019:i:6:p:199-220
    DOI: 10.5547/01956574.40.6.pren
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    References listed on IDEAS

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    3. Ogbonna, Ahamuefula E. & Farag, Markos & Akintande, Olalekan J. & Yaya, OlaOluwa S. & Olubusoye, Olusanya E., 2024. "Re-validating the Phillips Curve hypothesis in Africa and the role of oil prices: A mixed-frequency approach," Energy, Elsevier, vol. 303(C).
    4. Abubakar, Attahir B. & Karimu, Suale & Mamman, Suleiman O., 2024. "Inflation effects of oil and gas prices in the UK: Symmetries and asymmetries," Utilities Policy, Elsevier, vol. 90(C).
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    6. Anastasiou, Dimitris & Ftiti, Zied & Louhichi, Waël & Rizos, Anastasios & Stratopoulou, Artemis, 2025. "The influence of oil investors' sentiment on inflation dynamics and uncertainty," Energy Economics, Elsevier, vol. 142(C).

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