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Oil Price-Inflation Pass-Through in the United States over 1871 to 2018: A Wavelet Coherency Analysis

Author

Listed:
  • Aviral Kumar Tiwari

    (Montpellier Business School, Montpellier, France)

  • Juncal Cunado

    (University of Navarra, School of Economics, Edificio Amigos, E-31080 Pamplona, Spain)

  • Abdulnasser Hatemi-J

    (Department of Finance, UAE University, Al-Ain, UAE)

  • Rangan Gupta

    (Department of Economics, University of Pretoria, Pretoria, South Africa)

Abstract

This paper analyzes the oil price-inflation pass-through by studying the relationship between oil prices and U.S. Consumer Price Index (CPI) over the period January 1871- June 2018, at different frequencies, using a wavelet coherency analysis. Our main results suggest that the relationship between oil prices and CPI has changed over the analyzed time period, implying a decrease in the oil price- inflation pass-through over time. Furthermore, this relationship also varies across frequencies, suggesting that the evidence of oil price-inflation pass-through with oil prices leading CPI is weaker in the short-run.

Suggested Citation

  • Aviral Kumar Tiwari & Juncal Cunado & Abdulnasser Hatemi-J & Rangan Gupta, 2018. "Oil Price-Inflation Pass-Through in the United States over 1871 to 2018: A Wavelet Coherency Analysis," Working Papers 201865, University of Pretoria, Department of Economics.
    • Handle: RePEc:pre:wpaper:201865
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    3. Sarit Maitra, 2023. "Impact of Economic Uncertainty, Geopolitical Risk, Pandemic, Financial & Macroeconomic Factors on Crude Oil Returns -- An Empirical Investigation," Papers 2310.01123, arXiv.org, revised Oct 2023.
    4. Balcilar, Mehmet & Usman, Ojonugwa, 2021. "Exchange rate and oil price pass-through in the BRICS countries: Evidence from the spillover index and rolling-sample analysis," Energy, Elsevier, vol. 229(C).
    5. Kang, Sang Hoon & Lahmiri, Salim & Uddin, Gazi Salah & Arreola Hernandez, Jose & Yoon, Seong-Min, 2020. "Inflation cycle synchronization in ASEAN countries," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 545(C).
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    10. İbrahim Özmen & Şerife Özşahin, 2023. "Effects of global energy and price fluctuations on Turkey's inflation: new evidence," Economic Change and Restructuring, Springer, vol. 56(4), pages 2695-2728, August.
    11. Youshu Li & Junjie Guo, 2022. "The asymmetric impacts of oil price and shocks on inflation in BRICS: a multiple threshold nonlinear ARDL model," Applied Economics, Taylor & Francis Journals, vol. 54(12), pages 1377-1395, March.
    12. Balcilar, Mehmet & Roubaud, David & Usman, Ojonugwa & Wohar, Mark E., 2021. "Moving out of the linear rut: A period-specific and regime-dependent exchange rate and oil price pass-through in the BRICS countries," Energy Economics, Elsevier, vol. 98(C).
    13. Fazal, Rizwan & Rehman, Syed Aziz Ur & Bhatti, M. Ishaq, 2022. "Graph theoretic approach to expose the energy-induced crisis in Pakistan," Energy Policy, Elsevier, vol. 169(C).
    14. Ouyang, Zi-sheng & Liu, Meng-tian & Huang, Su-su & Yao, Ting, 2022. "Does the source of oil price shocks matter for the systemic risk?," Energy Economics, Elsevier, vol. 109(C).
    15. Roy, Rudra Prosad & Sinha Roy, Saikat, 2022. "Commodity futures prices pass-through and monetary policy in India: Does asymmetry matter?," The Journal of Economic Asymmetries, Elsevier, vol. 25(C).
    16. Köse, Nezir & Ünal, Emre, 2021. "The effects of the oil price and oil price volatility on inflation in Turkey," Energy, Elsevier, vol. 226(C).
    17. Salisu, Afees A. & Gupta, Rangan & Ji, Qiang, 2022. "Forecasting oil prices over 150 years: The role of tail risks," Resources Policy, Elsevier, vol. 75(C).
    18. Dinmukhamed Kelesbayev & Kundyz Myrzabekkyzy & Artur Bolganbayev & Sabit Baimaganbetov, 2022. "The Effects of the Oil Price Shock on Inflation: The Case of Kazakhstan," International Journal of Energy Economics and Policy, Econjournals, vol. 12(3), pages 477-481, May.
    19. Elsayed, Ahmed H. & Hammoudeh, Shawkat & Sousa, Ricardo M., 2021. "Inflation synchronization among the G7and China: The important role of oil inflation," Energy Economics, Elsevier, vol. 100(C).

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    More about this item

    Keywords

    Oil prices; Consumer Price Index; Pass-through; Wavelet coherency;
    All these keywords.

    JEL classification:

    • C49 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Other
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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