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Revisiting the linkages between oil prices and macroeconomy for the euro area: Does energy inflation still matter?

Author

Listed:
  • Fredj Jawadi

    (LUMEN - Lille University Management Lab - ULR 4999 - Université de Lille)

  • Abdoulkarim Idi Cheffou
  • Ruijun Bu

    (University of Liverpool)

Abstract

This study revisits the relationship between oil prices and the macroeconomy for the euro area while assessing the effects of recent energy inflation on the real economy. We particularly investigate the impact of energy inflation on the real sector (household consumption, firm investment, and economic growth), financial sector (inflation, financial market), and economic agents' confidence. Considering the monetary authority's recent actions, we review this oil price–macroeconomy relationship while taking into account the ongoing monetary policy to check the policy's efficiency and to assess whether the recent successive interventions of the European Central Bank (ECB) have attenuated the effects of energy inflation. We test these hypotheses in linear and nonlinear frameworks using threshold models that offer a flexible econometric modeling. Our results reveal two interesting findings. First, an oil price shift exerts a significant and nonlinear effect on the real and financial sectors. This impact is asymmetrical and varies by regime, depending on the economic situation (geopolitical tension, inflation, war in Ukraine, etc.). Additionally, we empirically and endogenously estimate the threshold level at which the impact of oil price changes is significant. Second, the reaction of economic growth and inflation rate to oil price shifts remains highly significant, even when considering the ongoing monetary policy of the ECB.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Fredj Jawadi & Abdoulkarim Idi Cheffou & Ruijun Bu, 2023. "Revisiting the linkages between oil prices and macroeconomy for the euro area: Does energy inflation still matter?," Post-Print hal-04478724, HAL.
    • Handle: RePEc:hal:journl:hal-04478724
    DOI: 10.1016/j.eneco.2023.107058
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    Cited by:

    1. Liu, Jiahao & Shen, Wenyu, 2024. "Financial instability in Europe: Does geopolitical risk from proximate countries and trading partners matter?," Finance Research Letters, Elsevier, vol. 66(C).
    2. Ghosh, Sajal & Kanjilal, Kakali, 2025. "A replication study on “Revisiting the linkages between oil prices and macroeconomy for the euro area: Does energy inflation still matter?”," Energy Economics, Elsevier, vol. 145(C).
    3. Diana-Claudia PERȚICAȘ & Roxana GAVRILUȚ & Olivia-Andreea MARCU & Adrian-Gheorghe FLOREA, 2024. "Do International Regulations Force Transport Companies To Reduce Their Carbon Emissions?," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 33(2), pages 83-91, December.
    4. Just, Małgorzata & Kliber, Agata & Echaust, Krzysztof, 2025. "Return connectedness between energy commodities and stock markets: New evidence from 31 energy sector companies in Europe," International Review of Financial Analysis, Elsevier, vol. 103(C).
    5. Bulat Mukhamediyev & Sayat Zhamanbayev & Aliya Mukhamediyeva, 2024. "Central Bank Independence and Oil Prices Impact on Macroeconomic Indicators," International Journal of Energy Economics and Policy, Econjournals, vol. 14(3), pages 9-17, May.
    6. Adrian-Gheorghe FLOREA & Diana-Claudia PERȚICAȘ & Roxana GAVRILUȚ, 2024. "The Impact Of The Age Of The Of Transport Trucks On The Level Of Pollution. A Study Case On The Development Regions Of Romania," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 33(1), pages 53-58, July.
    7. Mbassi, Christophe Martial & Samba, Cyrille Michel & Elomo Zogo, Thérèse, 2025. "Does monetary policy fuel energy consumption across the world? Focus on inflation targeting," Energy Economics, Elsevier, vol. 145(C).
    8. Dumiter Florin Cornel & Nicoară Ștefania Amalia & Nicoară Samuel & Bențe Cristian & Păiușan Luminița, 2025. "Modeling the Oil Price Influences Upon the Energy Sector in the Macroeconomic Context. Empirical Evidence from Central and Eastern European Countries," Studia Universitatis „Vasile Goldis” Arad – Economics Series, Sciendo, vol. 35(1), pages 1-29.

    More about this item

    JEL classification:

    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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