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

Author

Listed:
  • Ligia Topan

    (Universidad Complutense de Madrid)

  • César Castro

    (Universidad Pública de Navarra)

  • Miguel Jerez

    (Universidad Complutense de Madrid)

  • Andrés Barge-Gil

    (Universidad Complutense de Madrid)

Abstract

Oil 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.

Suggested Citation

  • Ligia Topan & César Castro & Miguel Jerez & Andrés Barge-Gil, 2020. "Oil price pass-through into inflation in Spain at national and regional level," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 11(4), pages 561-583, December.
    • Handle: RePEc:spr:series:v:11:y:2020:i:4:d:10.1007_s13209-020-00222-4
    DOI: 10.1007/s13209-020-00222-4
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    References listed on IDEAS

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    Cited by:

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    2. Polina S. Kuklinova & Vladimir V. Ilyashenko, 2022. "The impact of the inflation-targeting regime on the economic development of an industrial region," Journal of New Economy, Ural State University of Economics, vol. 23(2), pages 125-141, July.

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    More about this item

    Keywords

    Inflation; Deflation; Oil price; Forecasting; Simulation;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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