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.

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.

scholarly journals Oil Price Shocks, Systematic Monetary Policy and Economic Activity

2019 ◽  
Vol 58 (1) ◽  
pp. 65-81 ◽  
Author(s):  
Muhammad Zeshan ◽  
Wasim Shahid Malik ◽  
Muhammad Nasir
Keyword(s):  
Monetary Policy ◽  
Jel Classification ◽  
Oil Price ◽  
Oil Price Shocks ◽  
Structural Vector Autoregression ◽  
Price Shocks ◽  
Output Loss ◽  
The Impact ◽  
Auto Regression ◽  
Structural Vector

This study quantifies the impact of oil price shocks and the subsequent monetary policy response on output for Pakistan. It employs a quarterly Structural Vector Auto-regression framework for the period 1993–2015. It first discovers that Hamilton’s (1996) Net Oil Price Increase indicator appropriately reveals most of the oil price shocks hitting Pakistan’s economy. We find that a contractionary monetary policy, resulting from the oil price shocks, contributes to significant output loss in Pakistan. After encountering the Lucas critique, the present study finds that around 42 percent of the output loss is due to the ensuing tight monetary policy. This suggests that the central bank of Pakistan can reduce the impact of oil price shocks by reducing its intervention in the market. JEL Classification: E1, E3, E5 Keywords: Oil Price Shocks, Monetary Policy, Structural Vector Autoregression

Identifying asymmetric responses of sectoral equities to oil price shocks in a NARDL model

2020 ◽  
Vol 0 (0) ◽  
Author(s):  
Abderrazak Dhaoui ◽  
Julien Chevallier ◽  
Feng Ma
Keyword(s):  
Interest Rate ◽  
Financial Market ◽  
Oil Prices ◽  
Oil Price ◽  
Policy Implications ◽  
Oil Price Shocks ◽  
Price Shocks ◽  
Asymmetric Responses ◽  
The Impact ◽  
Nardl Model

AbstractThis study examines the asymmetric responses of sector stock indices returns to positive and negative fluctuations in oil prices using the NARDL model. Our empirical findings support indirect transmissions of oil price fluctuation to the financial market through industrial production and short-term interest rate. Furthermore, both direct and indirect impacts of oil price shocks on stock returns are sector dependent. These results are with substantial policy implications either for investors or for policymakers. They mainly help government authorities to reduce the instability in financial markets caused by the major oil price shocks. The analysis of the impact of oil price shocks on stock markets also helps the financial market participants to adjust their decisions and revise their coverage of energy policy that is substantially affected by the turbulence and uncertainty in the crude oil market. Finally, based on the forecast of the oil price shocks effects, the central bank should adjust the interest rate in order to face up to the inflation rate induced by oil prices since oil prices act as an inflationary factor.

scholarly journals Oil Prices and Inflation Dynamics

2017 ◽  
Vol 17 (196) ◽  
Author(s):  
Sangyup Choi ◽  
Davide Furceri ◽  
Prakash Loungani ◽  
Saurabh Mishra ◽  
Marcos Poplawski Ribeiro
Keyword(s):  
Developing Economies ◽  
Oil Prices ◽  
Oil Price ◽  
Oil Price Shocks ◽  
Price Shocks ◽  
Energy Subsidies ◽  
Percent Increase ◽  
Cross Country ◽  
The Impact ◽  
Domestic Inflation

We study the impact of fluctuations in global oil prices on domestic inflation using an unbalanced panel of 72 advanced and developing economies over the period from 1970 to 2015. We find that a 10 percent increase in global oil inflation increases, on average, domestic inflation by about 0.4 percentage point on impact, with the effect vanishing after two years and being similar between advanced and developing economies. We also find that the effect is asymmetric, with positive oil price shocks having a larger effect than negative ones. The impact of oil price shocks, however, has declined over time due in large part to a better conduct of monetary policy. We further examine the transmission channels of oil price shocks on domestic inflation during the recent decades, by making use of a monthly dataset from 2000 to 2015. The results suggest that the share of transport in the CPI basket and energy subsidies are the most robust factors in explaining cross-country variations in the effects of oil price shocks during the this period.

scholarly journals Oil Price Shocks and Fiscal Spending in Oil Producing Economy: The Role of Asymmetry

2018 ◽  
pp. 1-10
Author(s):  
Bernard Olagboyega Muse
Keyword(s):  
Crude Oil ◽  
Empirical Finding ◽  
Oil Prices ◽  
Oil Price ◽  
Oil Price Shocks ◽  
Price Shocks ◽  
Asymmetric Impact ◽  
The Impact ◽  
Fiscal Spending

Given their over reliance on proceeds from the sale of crude oil, fiscal spending in the oil-producing economy are often characterised with some specific challenges mainly due to the uncertainty in the nature of oil price movements in the international crude oil market. Motivated by the historical up – down trends in the international oil prices and their potential implications particularly for oil-producing countries, this paper explores linear and non-linear ARDL frameworks to examine the symmetric and asymmetric impact of oil price shocks on fiscal spending. Using the case of the Nigerian economy, this empirical finding suggests that shocks to international oil prices did matter for fiscal spending in the oil-producing economy. On the direction of the impact of the shocks, the finding of the non-rejection of the null hypothesis of no asymmetry thus implies that fiscal spending in Nigeria reacts indifferently to either a positive or negative oil price shocks.

scholarly journals Assessing the Impact of the Oil Price Shocks on Economic Growth in Oil-Exporting Arab Countries

2022 ◽  
Vol 19 ◽  
pp. 462-473
Author(s):  
Mayis G. Gülaliyev ◽  
Rahima N. Nuraliyeva ◽  
Ruhiyya A. Huseynova ◽  
Firudin E. Hatamov ◽  
Alikhanli S. Yegana ◽  
...  
Keyword(s):  
Economic Growth ◽  
Price Change ◽  
Practical Importance ◽  
Oil Prices ◽  
Political Stability ◽  
Arab Countries ◽  
Oil Price ◽  
Oil Price Shocks ◽  
Price Shocks ◽  
The Impact

The role of oil and gas in the modern economy is undeniable. That is why oil-exported countries have a good chance to wealth. But if the economy doesn't have diversification or there is no political stability this revenue cannot become welfare for the long run. As well as the changing of oil prices doe in the world market can impact the revenues of oil-exported countries. The purpose of the research – to assess the impact of the oil price shocks on economic growth in oil-exporting Arab countries. As a methodology, there were chosen VAR models and Granger causality tests. The practical importance of the research is to predict economic growth in other oil-exporting countries. The authors came to the conclusion that oil-price change has positive impacts on GDP growth in oil-rich Arab countries and there is the strong dependency from oil prices. The originality and scientific novelty of the research connected with this argue that oil revenues have impacts on economic growth only in economic and political stability.

scholarly journals Energy and Bank Equity Interactions

2021 ◽  
Vol 9 ◽  
Author(s):  
Mohammed Sharaf Shaiban ◽  
Di Li ◽  
Akram S. Hasanov
Keyword(s):  
Interest Rates ◽  
Banking Sector ◽  
Decomposition Analysis ◽  
Oil Prices ◽  
Price Impact ◽  
Oil Price ◽  
Oil Price Shocks ◽  
Price Shocks ◽  
Causality Test ◽  
The Impact

Oil price shocks harm real output and bank and industrial profit in most oil-importing countries, which has motivated us to investigate the impact of these shocks on the equity performance of banking industries. To fulfill the research objectives, we involve a sample of developed and emerging economies for comparison purposes. The objective of employing the Toda and Yamamoto (Journal of econometrics, 1995, 66 (1), 225–250) causality test is to explore the time-variant relationship between oil prices and banking indices to investigate how oil price shocks affect the performance of country-specific banking industries. In addition, an impulse response function and variance decomposition analysis are utilized to, respectively, examine the time-variant relationship between oil price shocks and macroeconomic factors and the performance of the banking sector. Results vary across different economies in our sample, but the magnitude of oil price impact is relatively significant in the US, the UK, Canada, Japan, Mexico, and Brazil. The findings indicate that oil price rises adversely affect equity bank indices in developed and emerging economics except for Mexico. Notably, our findings show that oil prices and interest rates jointly have significant power in explaining the banking equity variation and suggest that international bank portfolio investors should consider hedging oil price risk.

scholarly journals The Response of Remittances Inflows to Asymmetric Oil Price Shocks in Egypt

2019 ◽  
Author(s):  
Mohamed Samir Zahran
Keyword(s):  
Impulse Response ◽  
Oil Prices ◽  
Variance Decomposition ◽  
Oil Price ◽  
Var Model ◽  
Impulse Response Functions ◽  
Oil Price Shocks ◽  
Response Functions ◽  
Price Shocks ◽  
The Impact

Purpose: The purpose of this paper is to explore and analyse the dynamic relationship between remittances inflows of Egyptians working abroad and asymmetric oil price shocks. Design: This study uses a vector autoregressive (VAR) model to explain the impulse response functions (IRFs) and the forecast error variance decomposition (FEVD). The rationale behind using these tools is its ability to examine the dynamic effects of our variables of interest. Findings: The impulse response functions confirmed that remittance inflows have various responses to asymmetric oil price shocks. For instance, inflowing remittances increase in response to positive oil price shocks, while it decreases in response to negative oil price shocks. Also, the results indicate that the responses are significant in the short and medium-run and insignificant in the long run. The magnitude of these responses reaches its peak or trough in the third year. Further, the variance decomposition reveals that oil price decreases are more influential than oil price increases. Originality: This means that remittances inflows in Egypt are pro-cyclical with oil price shocks. That explained by the fact that more than one-half of those remittances sent from GCC countries where real economic growth is very pro-cyclical with the oil prices. This empirical assessment will help policymakers to determine the behaviour of remittances and highlights the impact of different kinds of oil prices shocks on remittances. Unlike the little existing literature, this study is the first study applied the VAR model using a novel dataset spanning 1960-2016.

Demand, supply, monetary policy, and oil price shocks in the Russian economy (Analysis based on the BVAR model with sign restrictions)

2020 ◽  
pp. 83-104
Author(s):  
D. A. Lomonosov ◽  
A. V. Polbin ◽  
N. D. Fokin
Keyword(s):  
Monetary Policy ◽  
Positive Impact ◽  
Oil Price ◽  
Monetary Shocks ◽  
Oil Price Shocks ◽  
Price Shocks ◽  
Demand Shocks ◽  
Russian Economy ◽  
Sign Restrictions ◽  
The Impact

This paper considers a simple Bayesian vector autoregressive model for the Russian economy based on data for real GDP, GDP deflator and oil price as an exogenous variable that acts as a proxy variable for the terms of trade. Along with the impact of oil price shocks, the model estimates the impact of supply and demand shocks, the identification of which is based on the approach of sign restrictions. According to the results obtained, at the end of 2014 and in 2015, demand shocks had a positive impact on GDP growth, which can be interpreted as a positive effect of the ruble devaluation at the end of 2014. In the next years, demand shocks led mainly to a slowdown in economic growth. The paper also attempts to identify monetary policy shocks and assesses their impact on GDP, household consumption and investment. According to the results, the effect of monetary shocks in 2015—2019 on all endogenous variables was negative. However, an increase in the interest rate at the end of 2014 is identified mostly as an endogenous reaction to other shocks, and the effect of the monetary shock on GDP in 2015 is nearly zero. In 2017, monetary shocks slowed down GDP by 0.92 percentage points.

Modeling the real ruble exchange rate under monetary policyregime change

2017 ◽  
pp. 61-78 ◽  
Author(s):  
A. Polbin
Keyword(s):  
Exchange Rate ◽  
Real Exchange Rate ◽  
Structural Break ◽  
Oil Prices ◽  
Oil Price ◽  
Oil Price Shocks ◽  
Price Shocks ◽  
Policy Regime ◽  
The Real ◽  
Long Run

The paper estimates vector error correction model (VECM) for the real ruble exchange rate and real oil prices. The VECM model takes into account the structural break in short-term parameters due to the Bank of Russia monetary policy regime change in November 2014. Estimates show that the real exchange rate response to oil price shocks has dramatically changed. Before November2014 it took approximately one year to correct 50% of the real exchange rate gap due to oil prices permanent change. From November 2014 the real exchange rate adapts to oil price shocks almost instantly. The estimate of long-run elasticity of the real exchange rate on real oil prices is 0.33.

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