Oil-food price dynamics in an oil-dependent emerging economy

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Opeoluwa Adeniyi Adeosun ◽  
Olaolu Richard Olayeni ◽  
Olumide Steven Ayodele
Keyword(s):  
Inflation Targeting ◽  
Food Prices ◽  
Food Price ◽  
Oil Price ◽  
Price Dynamics ◽  
Oil Price Shocks ◽  
Price Shocks ◽  
Content Type ◽  
Pass Through

Purpose This paper aims to examine the transmission from oil price to local food price returns in Nigeria from January 1995 to May 2019. Design/methodology/approach To circumvent erratic behaviours and account for possibilities of noises at the edge of the wavelet signals, the paper combines wavelet and Markov-switching techniques to determine the significance and magnitude of oil–food price dynamics across different time scales. Findings It is shown that oil to food price pass-through changed across frequencies. Notably, results reveal a swift pass-through which signals the dominance of the direct effect of oil price shocks on food prices with evidence of weak spillover in the short term. The medium- and long-term horizons witness the dominance of the indirect effect of oil price shocks with much sluggish transmission to food prices; the highest significant pass-through of about 4% are also observed when the oil price is denominated in the naira–USD exchange rate. Originality/value The study improves understanding of the relationship between oil price shocks and domestic food price returns. It shapes policy prescription on appropriate inflation targeting strategies of monetary authorities.

Asymmetric pass through of oil price to Chinese economic growth: new evidence from industrial sectors

Kybernetes ◽  
2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Donghui Liu ◽  
Lingjie Meng ◽  
Yudong Wang
Keyword(s):  
Oil Price ◽  
Partial Sums ◽  
Oil Price Shocks ◽  
Price Shocks ◽  
Short Term ◽  
Price Changes ◽  
Content Type ◽  
Industrial Sectors ◽  
Ferrous Metals

PurposeOil is crucial for industrial development. This paper investigates the impacts of oil price changes on China's industrial growth and examines whether the impacts are asymmetric. The estimations can help determine how oil price shocks are transmitted throughout the economy.Design/methodology/approachThis paper adopts West Texas Intermediate (WTI) crude oil price and industrial sector output and uses monthly data. The recently developed nonlinear autoregressive distributed lag (NARDL) model is employed to illustrate the effects in both the short term and long term. Importantly, under NARDL framework, this paper examines whether the impacts are asymmetric by decomposing oil price shocks into their positive and negative partial sums.FindingsThe empirical results prove clear evidence of asymmetries in the short term, long term or both terms. Specifically, some sectors benefit from, rather than suffer from higher oil prices, even some energy-intensive sectors, i.e. C31 (Smelting and Pressing of Ferrous Metals) and C32 (Smelting and Pressing of Non-ferrous Metals). However, the effects on some other energy-intensive sectors appear insignificant. Additionally, the results prove significantly negative responses in some sectors in the long term, and most of these sectors are in the top half of the ranking by energy consumptions.Originality/valueThis paper studies the economic responses at a disaggregated level by employing industry-level data. NARDL method is used to decompose oil price changes into their increases and decreases and investigate the asymmetries in the impacts of oil price changes.

scholarly journals Monetary policy and the effect of the oil prices pass-through to inflation

2019 ◽  
Vol 5 (3) ◽  
pp. 211-219
Author(s):  
Philipp Kartaev ◽  
Ilya Medvedev
Keyword(s):  
Monetary Policy ◽  
Inflation Targeting ◽  
Dynamic Models ◽  
Oil Prices ◽  
Oil Price ◽  
Oil Price Shocks ◽  
Price Shocks ◽  
Policy Regime ◽  
Pass Through ◽  
The Impact

The paper examines the impact of oil price shocks on inflation, as well as the impact of the choice of the monetary policy regime on the strength of this influence. We used dynamic models on panel data for the countries of the world for 2000–2017. It is shown that the impact of changes in oil prices on inflation is carried out predominantly through the channel of exchange rate. The paper demonstrates the influence of the transition to inflation targeting on the nature of the relationship between oil price shocks and inflation. This effect is asymmetrical: during periods of rising oil prices, inflation targeting reduces the effect of the oil prices pass-through, limiting the negative effects of shock. During periods of decline in oil prices, this monetary policy regime, in contrast, contributes to a stronger pass-through, helping to reduce inflation.

Monetary policy and the effect of the transfer of oil prices to inflation

2020 ◽  
pp. 41-50
Author(s):  
Ph. S. Kartaev ◽  
I. D. Medvedev
Keyword(s):  
Monetary Policy ◽  
Inflation Targeting ◽  
Dynamic Models ◽  
Oil Prices ◽  
Oil Price ◽  
Oil Price Shocks ◽  
Negative Effects ◽  
Price Shocks ◽  
Policy Regime ◽  
The Impact

The paper examines the impact of oil price shocks on inflation, as well as the impact of the choice of the monetary policy regime on the strength of this influence. We used dynamic models on panel data for the countries of the world for the period from 2000 to 2017. It is shown that mainly the impact of changes in oil prices on inflation is carried out through the channel of exchange rate. The paper demonstrates the influence of the transition to inflation targeting on the nature of the relationship between oil price shocks and inflation. This effect is asymmetrical: during periods of rising oil prices, inflation targeting reduces the effect of the transfer of oil prices, limiting negative effects of shock. During periods of decline in oil prices, this monetary policy regime, in contrast, contributes to a stronger transfer, helping to reduce inflation.

Exploring the inflationary effect of oil price in the US

2019 ◽  
Vol 13 (1) ◽  
pp. 60-76 ◽  
Author(s):  
Amine Lahiani
Keyword(s):  
Growth Rate ◽  
Structural Breaks ◽  
Oil Prices ◽  
Oil Price ◽  
Inflation Expectations ◽  
Oil Price Shocks ◽  
Price Shocks ◽  
Content Type ◽  
The Us ◽  
The Relationship

PurposeThe purpose of this paper is to explore the effect of oil price shocks on the US Consumer Price Index over the monthly period from 1876:01 to 2014:04.Design/methodology/approachThe author uses the Bai and Perron (2003) structural break test to split the data sample into sub-periods delimited by the computed break dates. Afterwards, the author uses the quantile treatment effects over the full sample and then, by including sub-periods dummies to accommodate the selected structural breaks that drive the relationship between inflation and oil price growth.FindingsThe findings include a decreased transmission effect of oil price changes on inflation in recent years; a varied elasticity of inflation to the growth rate of oil prices across the distribution; and, finally, evidence of asymmetry in the relationship between the growth rate of oil prices and inflation, with a higher transmission mechanism for decreasing rather than increasing oil prices.Practical implicationsPolicymakers should remain alert to monitoring potential inflation increases and should take precautionary measures to anchor inflation expectations, because inflation reacts differently to positive and negative oil price shocks. Moreover, authorities should consider the asymmetric reaction of inflation to oil price shocks to adopt an appropriate monetary policy strategy to achieve the price stability target.Originality/valueThe paper used a quantile regression model with structural breaks, which has not yet been used in the literature.

On the asymmetric response of the exchange rate to shocks in the crude oil market

2020 ◽  
Vol 14 (4) ◽  
pp. 839-852 ◽  
Author(s):  
Huthaifa Alqaralleh
Keyword(s):  
Exchange Rate ◽  
Exchange Rates ◽  
Financial Crises ◽  
Oil Price ◽  
Series Data ◽  
Oil Price Shocks ◽  
Price Shocks ◽  
Content Type ◽  
The Exchange Rate ◽  
Asymmetric Cointegration

Purpose This paper aims to investigate the nonlinear dynamics in the effects of oil price shocks on the exchange rate for a sample from the Group of Twenty (G20) over the period 1994:1-2019:1. Design/methodology/approach Using monthly time series data covering the period1994:1-2019:1, the author first use the non-parametric triples test of Randles et al. (1980) to ascertain the existence of asymmetric properties in the sample of exchange rates. Then the author used the nonlinear ARDL cointegration approach developed by Shin et al. (2014) to examine the reaction of these exchange rates to the oil price shocks. Findings This study has identified significant evidence that the exchange rate is asymmetrically distributed, with the effect that high appreciation of the exchange rate is followed by slower depreciation. The NARDL results support such asymmetry even more strongly because in the test the exchange rate is shown to react differently in the long term to positive and negative shocks in oil prices. Another major finding was that the speed of adjustment differed over the sample, as the cumulative dynamic multipliers effect highlighted. Research limitations/implications This change in direction and the employment of non-linear technique can be to obtain better insight into the model specification, which the author believes, will not only enhance the findings in the literature but also enhance forecasting and decision-making. Practical implications A practical implication of this change is the possibility that policymakers and participants concerned with exchange rate stability should intervene in the market to alleviate the unfavourable impact of oil price shocks on the exchange rate. Originality/value Addressing this nonlinear dynamic in the effects of oil price shocks on the exchange rate have at least the following two important reasons: asymmetry and regime change are types of nonlinearities that affect the market dynamics, especially, over marked sample period with such financial crises as the global financial crises of 2007, thereby violating the linear models. Adopting an asymmetric cointegration technique permits to incorporate cointegrated positive and negative components of the considered series.

scholarly journals Oil price pass-through into inflation in Spain at national and regional level

SERIEs ◽  
2020 ◽  
Vol 11 (4) ◽  
pp. 561-583
Author(s):  
Ligia Topan ◽  
César Castro ◽  
Miguel Jerez ◽  
Andrés Barge-Gil
Keyword(s):  
Econometric Models ◽  
Regional Level ◽  
Oil Price ◽  
Oil Price Shocks ◽  
Price Shocks ◽  
Energy Component ◽  
Pass Through ◽  
The Relationship

AbstractOil price showed sharp fluctuations in recent years which revived the interest in its effect on inflation. In this paper, we discuss the relationship between oil price and inflation in Spain, at national and regional levels, and making the distinction between energy and non-energy inflation. To this end, we fit econometric models to measure the effect of oil price shocks on inflation and to predict them under different scenarios. Our results show that almost half of the volatility of changes in total inflation is explained by changes in oil price. As could be expected, the energy component of inflation drives this effect. We also find that, under the most likely scenarios, 1-year ahead total inflation will be moderate, with relevant differences across regions.

scholarly journals Inflation Expectations and the Pass-Through of Oil Prices

2021 ◽  
pp. 1-26
Author(s):  
Knut Are Aastveit ◽  
Hilde C. Bjørnland ◽  
Jamie L. Cross
Keyword(s):  
Oil Prices ◽  
Structural Var ◽  
Oil Price ◽  
Inflation Expectations ◽  
Oil Price Shocks ◽  
Price Shocks ◽  
Demand And Supply ◽  
The Great Recession ◽  
Oil Market ◽  
Pass Through

Abstract Inflation expectations and the associated pass-through of oil price shocks depend on demand and supply conditions underlying the global oil market. We establish this result using a structural VAR model of the global oil market that jointly identifies transmissions of oil demand and supply shocks through real oil prices to both expected and actual inflation. We demonstrate that economic activity shocks have a significantly longer lasting effect on inflation expectations and actual inflation than other types of real oil price shocks, and resolve disagreements around the role of oil prices in explaining the missing deflation puzzle of the Great Recession.

scholarly journals Pass-Through of Crude-oil Price Shocks to Consumer Prices in Nigeria: Pre and Post 2008 Global Financial Crisis

2021 ◽  
pp. 115-143
Author(s):  
Eric I. Otoakhia
Keyword(s):  
Financial Crisis ◽  
Crude Oil ◽  
Global Financial Crisis ◽  
Oil Price ◽  
Oil Price Shocks ◽  
Crude Oil Price ◽  
Price Shocks ◽  
Price Inflation ◽  
Pass Through ◽  
The Impact

This study investigates the responses of consumer price index (CPI) to crude oil price shocks in the pre- and post-2008 global financial crisis. The study used the Structural Vector Autoregressive model to analyse monthly data from 2000M01 to 2019M12. The impulse response analysis showed that for pre and post-crisis periods, oil price shocks have a positive impact on CPI. This impact was an insignificant direct momentary increase in pre-crisis CPI before dissipating. Conversely, the impact on post crisis CPI response tends to be stable and long-lasting starting from the third month. The confidence bands for the post crisis CPI are large, indicating the long-lasting positive response in the CPI pose no significant threat to price stability in the long run horizon. In conclusion, CPI response varies in terms of intensity for pre and post crisis periods. In terms of level of significance, the effect of the shocks on CPI is transient and insignificant in both periods. The post crisis oil price shock is not a significant channel that created price instability in Nigeria after the crisis and this study recommend partial deregulation of energy price should be maintained. Establishing oil price –inflation pass-through, external shocks like financial crisis should be accounted for.

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