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The Effect of Oil Price Shocks on the Czech Economy


  • Kamil Dybczak
  • David Vonka
  • Nico van der Windt


In the course of 2002 up to the end of 2007, very steep growth of oil prices, but no remarkable slowdown of either the world economy or the Czech economy, was observed. This phenomenon raises a question about the impact of oil prices on modern economies. Analyzing the available data we can conclude that notwithstanding the full dependence of the Czech economy on oil imports, its overall dependence on imported energy sources is relatively low. Compared to the EU15 level the energy intensity of the Czech economy is quite high. Nevertheless, further improvements in this area are expected. Furthermore, the appreciation of CZK and the set-up of the tax system significantly reduced the volatility of the consumer oil price between 2002 and 2007. Using a structural CGE model we quantify the impact of oil price changes on the Czech economy and demonstrate that it is not dramatic despite the oil price turmoil in the years 2000 to the end of 2007. We find that a 20% increase in the CZK oil price tends to decrease the GDP level by 1:5% and 0:8% in the short and long run, respectively. Short-run annual GDP growth decreases by 0:3 p.p. Concerning prices, inflation would accelerate by around 0:4 p.p. per annum in the short run.

Suggested Citation

  • Kamil Dybczak & David Vonka & Nico van der Windt, 2008. "The Effect of Oil Price Shocks on the Czech Economy," Working Papers 2008/5, Czech National Bank, Research Department.
  • Handle: RePEc:cnb:wpaper:2008/5

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    References listed on IDEAS

    1. Michael P. Keane & Eswar S. Prasad, 1991. "The employment and wage effects of oil price shocks: a sectoral analysis," Discussion Paper / Institute for Empirical Macroeconomics 51, Federal Reserve Bank of Minneapolis.
    2. A Carruth & M Hooker & A Oswald, 1994. "Unemployment, Oil Prices and the Real Interest Rate: Evidence from Canada and the UK," CEP Discussion Papers dp0188, Centre for Economic Performance, LSE.
    3. Tibor Hledik, 2003. "Modelling the Second-Round Effects of Supply-Side Shocks on Inflation," Working Papers 2003/12, Czech National Bank, Research Department.
    4. Hamilton, James D, 1983. "Oil and the Macroeconomy since World War II," Journal of Political Economy, University of Chicago Press, vol. 91(2), pages 228-248, April.
    5. Douwe Kingma & Wim Suyker, 2004. "FAQs about oil and the world economy," CPB Memorandum 104, CPB Netherlands Bureau for Economic Policy Analysis.
    6. Rebeca Jimenez-Rodriguez & Marcelo Sanchez, 2005. "Oil price shocks and real GDP growth: empirical evidence for some OECD countries," Applied Economics, Taylor & Francis Journals, vol. 37(2), pages 201-228.
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    Cited by:

    1. Zuzana Křístková, 2010. "Approaches to the Dynamization of the CGE Model Applied to the Czech Republic," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 46(0), pages 59-82, May.
    2. Jan Babecky & Oxana Babetskaia-Kukharchuk & Kamil Galuscak & Dana Hajkova & Jaroslav Hermanek & Tomas Holub & Roman Horvath & Petr Jakubik & Lubos Komarek & Zlatuse Komarkova & Petr Kral & Filip Novot, 2008. "Analyses of the Czech Republic's Current Economic Alignment with the Euro Area 2008," Occasional Publications - Edited Volumes, Czech National Bank, Research Department, number as08 edited by Dana Hajkova.
    3. Feldkircher, Martin, 2015. "A global macro model for emerging Europe," Journal of Comparative Economics, Elsevier, vol. 43(3), pages 706-726.
    4. Zuzana Smeets Kristkova, 2011. "Impact of R&D investments on the economic growth of the Czech Republic – a recursively dynamic CGE approach," EcoMod2011 3137, EcoMod.
    5. Zuzana Křístková, 2010. "Approaches to the Dynamization of the CGE Model Applied to the Czech Republic," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 46(0), pages 59-82, May.
    6. Zuzana Křístková, 2012. "Impact of R&D Investment on Economic Growth of the Czech Republic - A Recursively Dynamic CGE Approach," Prague Economic Papers, University of Economics, Prague, vol. 2012(4), pages 412-433.
    7. repec:prg:jnlpep:v:2013:y:2013:i:4:id:432:p:412-433 is not listed on IDEAS
    8. AydIn, Levent & Acar, Mustafa, 2011. "Economic impact of oil price shocks on the Turkish economy in the coming decades: A dynamic CGE analysis," Energy Policy, Elsevier, vol. 39(3), pages 1722-1731, March.
    9. Antonella Cavallo & Antonio Ribba, 2017. "Measuring the Effects of Oil Price and Euro-area Shocks on CEECs Business Cycles," Center for Economic Research (RECent) 128, University of Modena and Reggio E., Dept. of Economics "Marco Biagi".
    10. Zuzana KRISTKOVA, 2013. "Analysis of Private R&D Effects in a CGE Model with Capital Varieties: The Case of the Czech Republic," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 63(3), pages 262-287, July.
    11. Olga Kiuila, 2011. "Interactions between trade and environmental policies in the Czech economy," Working Papers 2011-16, Faculty of Economic Sciences, University of Warsaw.

    More about this item


    CGE; Czech Republic; oil price.;

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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