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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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    References listed on IDEAS

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    Cited by:

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    2. Pal, Debdatta & Mitra, Subrata Kumar, 2019. "Asymmetric oil price transmission to the purchasing power of the U.S. dollar: A multiple threshold NARDL modelling approach," Resources Policy, Elsevier, vol. 64(C).
    3. Jiang, Zhuhua & Yoon, Seong-Min, 2020. "Dynamic co-movement between oil and stock markets in oil-importing and oil-exporting countries: Two types of wavelet analysis," Energy Economics, Elsevier, vol. 90(C).
    4. 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).
    5. Köse, Nezir & Ünal, Emre, 2021. "The effects of the oil price and oil price volatility on inflation in Turkey," Energy, Elsevier, vol. 226(C).
    6. 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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