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Crude Oil Price Changes and Inflation: Evidence for Asia and the Pacific Economies

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  • Jiranyakul, Komain

Abstract

This paper examines the influence of crude oil price on inflation in eight Asian and two of the pacific economies, which are oil-importing countries. The period of investigation is from 1987M5 to 2019M12. The results of bounds testing for cointegration reveal that there is a stable positive long-run relationship between the consumer price index and crude oil price in most of these countries during the period of low and less fluctuating oil prices. However, the stable long-run relationship is found in eight countries, but this stable relationship is found only in one country during the period of high and more fluctuating oil prices. The long-run pass-through of crude oil prices to consumer prices is partial. In the short run, the relationship between a crude oil price change and inflation indicates that the short-run pass-through is low in most cases, but this pass-through is more apparent during the period of high and more fluctuating oil prices. Therefore, the structural break seems to matter in the pass-through of crude oil price to consumer prices in both the long and short run. The findings suggest accommodative monetary policy measures to alleviate the inflation rate.

Suggested Citation

  • Jiranyakul, Komain, 2021. "Crude Oil Price Changes and Inflation: Evidence for Asia and the Pacific Economies," MPRA Paper 110032, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:110032
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    File URL: https://mpra.ub.uni-muenchen.de/110032/1/MPRA_paper_110032.pdf
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    References listed on IDEAS

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    6. Zakaria, Muhammad & Khiam, Shahzeb & Mahmood, Hamid, 2021. "Influence of oil prices on inflation in South Asia: Some new evidence," Resources Policy, Elsevier, vol. 71(C).
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    Cited by:

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    More about this item

    Keywords

    Crude oil price; inflation rate; structural break; oil-importing countries;
    All these keywords.

    JEL classification:

    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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