An investigation on the impacts of oil price shocks on domestic inflation: A SVAR approach

Faridi

2022

JAFEE

Purpose: The key objective of the analysis is to explore the impact of oil prices and exchange rates on the inflation rate in Pakistan by using annual time-series data from the period 1980 to 2020. Design/Methodology/Approach: The augmented Dickey-Fuller test, bound test approach, and ARDL model are applied to achieve the objectives of the study. Findings: It is found that the crude oil prices and real effective exchange rate are found to be significant factors that influence the inflation rate in Pakistan. The other findings explored that money supply, exports, and gross fixed capital formation are positively related to the inflation rate. Implications/Originality: The author’s recommended that policymakers should take steps to control the inflation rate by regulating the fiscal and monetary policy measures in the right direction.

Section: Discussionsupporting

confidence: 60%

Changing Oil Prices, Exchange Rates and its Impact on Inflation in Pakistan

Faridi

2022

JAFEE

“…Utilizing a panel ARDL framework, Sek, Teo and Wong (2015) discovered that the impact was distinct between the two groups -tended to be more severe for the high oil dependency group than the low oil dependency group, which are mostly oil producers. Sek and Lim (2016) also found that CPI inflation in oil exporting countries does not respond to oil supply and demand shocks, whereas supply shocks can be a strong determinant of inflation in oil importing countries.…”

Section: -113mentioning

confidence: 97%

“…Results from their analysis show a positive and incomplete pass-through in both the short and long term, indicating that oil price hikes lead to increase in inflation in Iran. In a comparative study, Sek, Teo and Wong (2015) and Sek and Lim (2016) distinguished between high and low oil-dependent countries and investigated the impact of oil price shocks on inflation in the two groups of countries.…”

Section: -113mentioning

confidence: 99%

Asymmetric Impact of Oil Price on Inflation in Nigeria

Bawa¹,

Abdullahi²,

Tukur³

et al. 2021

CBN-JAS

This study examines the impact of oil price shocks on inflation in Nigeria. A NonLinear Autoregressive Distributed Lag (NARDL) approach was applied on quarterly data spanning 1999Q1 to 2018Q4. Results showed that oil price increases led to increase in headline, core and food measures of inflation in Nigeria. However, a decline in oil price resulted in a decline in the marginal cost of production and culminated in moderation of domestic inflation. Furthermore, negative oil price shocks led to higher inflation in Nigeria when exchange rate is dropped from the models, indicating that exchange rate absorbed the impact of oil price declines earlier, as lower oil prices culminated in lower external reserve, depreciation of the naira and ultimately higher inflationary pressures. Also, core inflation tends to respond more to oil price increases than food inflation. These results were robust to changes in econometric specifications and sample period. The study recommends that monetary policy actions of the Central Bank of Nigeria should focus on taming core inflation in periods of substantial oil price increases while strengthening its efforts at ensuring domestic sustainability in food production through its agricultural intervention programmes to further minimize the impact of international oil prices on food inflation. Similarly, the fiscal authorities should ensure that the fiscal stance is not excessively procyclical in periods of rising oil prices.

“…In contrast, several studies decomposed crude oil prices into demand shock, oil supply shock and risk shock, and this identification of different types produced a mixed impact on inflation (Ekong & Effiong, 2015; Sek & Lim, 2016). Peersman and Van Robays (2012) and Gupta, Ivanov & Choi (2021) documented that the inflation rate is driven by oil supply shock.…”

Section: Literature Reviewmentioning

confidence: 99%

The effect of the global supply chain and oil prices on the inflation rates in advanced economies and emerging markets

Mohammed

Tiwari

et al. 2023

Geological Journal

This study investigates the effect of global supply chain pressures and crude oil prices on the consumer price index from October 1997 to February 2022 using panel linear and nonlinear autoregressive distributed lags (ARDLs, NARDLs). The results showed that the asymmetric effect of the global supply chain on the inflation rate is stronger when the supply chain increases than when it decreases in the long run for advanced economies and vice versa in emerging markets. A one standard deviation of the supply chain pressures has rebounded the inflation rate by about 1.7% and 0.71% for advanced economies and emerging markets, respectively. The findings establish that a 10 U.S. dollar increase in oil prices leads the inflation rate to rise by 0.1%–0.6% for all countries in the short run. However, the impact of the global supply chain index fits much better with the inflation rate than the oil prices in the short and long run, including the subprime crisis, such as the COVID‐19 outbreak, and the beginning of the Russo–Ukrainian conflict. Thus, the empirical results of the current study provide acumens for policymakers of advanced economies and emerging markets to consume green energy and make use of green technology and environmental innovations for counterbalancing the inflation issues induced by the higher rates of oil prices without halting the economic growth and sustainable development.