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Unraveling the Nexus:Oil Price Dynamics and Inflation

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  • ANDRIANADY, Ravahiny Josué
  • RAZANAJATOVO, H. Yves
  • RAVELOMANANTSOA, M. Fabienne

Abstract

This work employs the Autoregressive Distributed Lag (ARDL) approach to investigate the nexus between macroeconomic variables and inflation in Madagascar. The findings reveal significant impacts of various factors, including imports, GDP, exchange rates, and oil prices, on inflation dynamics. Specifically, the study highlights the substantial influence of oil prices, with a one-unit increase leading to a 9.21 unit rise in inflation. These results underscore the importance of implementing targeted policy measures to address the inflationary pressures arising from volatile oil markets. Strategies such as diversification of imports, energy source diversification, and improvements in public transportation infrastructure are recommended to mitigate the adverse effects of oil price fluctuations and promote economic stability in Madagascar.

Suggested Citation

  • ANDRIANADY, Ravahiny Josué & RAZANAJATOVO, H. Yves & RAVELOMANANTSOA, M. Fabienne, 2024. "Unraveling the Nexus:Oil Price Dynamics and Inflation," MPRA Paper 120686, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:120686
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    References listed on IDEAS

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    5. Mork, Knut Anton, 1989. "Oil and Macroeconomy When Prices Go Up and Down: An Extension of Hamilton's Results," Journal of Political Economy, University of Chicago Press, vol. 97(3), pages 740-744, June.
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    JEL classification:

    • A1 - General Economics and Teaching - - General Economics
    • C0 - Mathematical and Quantitative Methods - - General
    • C01 - Mathematical and Quantitative Methods - - General - - - Econometrics

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