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Incidencia de los Choques Externos y Domésticos sobre la Dinámica de la Inflación: Evidencia a partir de un VAR Bayesiano
[Incidence of External and Domestic Shocks on Inflation Dynamics: Evidence from a Bayesian VAR]

Author

Listed:
  • Jiménez, Miguel A.
  • Ramírez, Francisco A.

Abstract

This paper analyzes the effect of an oil shock on some key macroeconomic variables for the case of the Dominican Republic, particularly the response of inflation and real economic activity. In addition, the elasticity of short run and long run term on petroleum derivatives commonly used in the Dominican Republic are estimated. A Bayesian VAR is used to evaluate the effect of an unanticipated increase of 10% in the price of oil. wing conclusions: 1) changes in oil prices have significant effects on the dynamics of non-core component of inflation, as well as other macroeconomic variables, except for core inflation; 2) to curb inflation, monetary policy reacts in a restrictive way, resulting in a temporary appreciation of the real exchange rate, as a result of rising interest rates; 3) real economic activity responds negatively deviating from its long-term trend with effects that persists over one year 4) last, but not least: historical decomposition shows that the non-core component of inflation is explained by a decrease of oil prices.

Suggested Citation

  • Jiménez, Miguel A. & Ramírez, Francisco A., 2015. "Incidencia de los Choques Externos y Domésticos sobre la Dinámica de la Inflación: Evidencia a partir de un VAR Bayesiano [Incidence of External and Domestic Shocks on Inflation Dynamics: Evidence ," MPRA Paper 68334, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:68334
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    File URL: https://mpra.ub.uni-muenchen.de/68334/1/Choques_externos_y_domesticos_Inflacion-VAR_Bayesiano.pdf
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    References listed on IDEAS

    as
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    2. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
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    More about this item

    Keywords

    Oil prices; inflation; business cycles;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy

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