Modelling Inflation Dynamics and Global Oil Price Shocks in OAPEC Countries: TVP-VAR
This paper aims to examine the dynamic pass-through effect of oil price shocks on inflation in OAPEC countries using quarterly data ranging from 1990:Q1 to 2022:Q4. The incorporation of the TVP-VAR model along with the Markov Chain Monte Carlo method with stochastic volatility estimation offers a r...
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EconJournals
2024-05-01
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| Series: | International Journal of Energy Economics and Policy |
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| Online Access: | https://www.econjournals.com.tr/index.php/ijeep/article/view/15686 |
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| author | Marwa Elsherif |
| author_facet | Marwa Elsherif |
| author_sort | Marwa Elsherif |
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This paper aims to examine the dynamic pass-through effect of oil price shocks on inflation in OAPEC countries using quarterly data ranging from 1990:Q1 to 2022:Q4. The incorporation of the TVP-VAR model along with the Markov Chain Monte Carlo method with stochastic volatility estimation offers a robust framework for capturing the time-varying nature of the relationship. Additionally, the analysis of the Impulse Response Function provides valuable insights into the short-term and long-term dynamics following oil price shocks. The results demonstrate a significant positive pass-through effect of oil prices on inflation in the sample member states, with heterogeneous magnitude and persistence. These variations are attributed to diversity in oil dependency, exchange rate regimes, monetary policy frameworks and the degree of openness to global markets. The study suggests the need for effective inflation management strategies and appropriate policy responses to oil price fluctuations. Furthermore, policymakers may consider adjusting exchange rates, interest rates, or trade policies to manage inflationary pressures effectively.
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| format | Article |
| id | doaj-art-485e1aa02fef41bea93f061f5e4f9624 |
| institution | Kabale University |
| issn | 2146-4553 |
| language | English |
| publishDate | 2024-05-01 |
| publisher | EconJournals |
| record_format | Article |
| series | International Journal of Energy Economics and Policy |
| spelling | doaj-art-485e1aa02fef41bea93f061f5e4f96242024-12-27T01:04:39ZengEconJournalsInternational Journal of Energy Economics and Policy2146-45532024-05-0114310.32479/ijeep.15686Modelling Inflation Dynamics and Global Oil Price Shocks in OAPEC Countries: TVP-VARMarwa Elsherif0Helwan University, Cairo, Egypt This paper aims to examine the dynamic pass-through effect of oil price shocks on inflation in OAPEC countries using quarterly data ranging from 1990:Q1 to 2022:Q4. The incorporation of the TVP-VAR model along with the Markov Chain Monte Carlo method with stochastic volatility estimation offers a robust framework for capturing the time-varying nature of the relationship. Additionally, the analysis of the Impulse Response Function provides valuable insights into the short-term and long-term dynamics following oil price shocks. The results demonstrate a significant positive pass-through effect of oil prices on inflation in the sample member states, with heterogeneous magnitude and persistence. These variations are attributed to diversity in oil dependency, exchange rate regimes, monetary policy frameworks and the degree of openness to global markets. The study suggests the need for effective inflation management strategies and appropriate policy responses to oil price fluctuations. Furthermore, policymakers may consider adjusting exchange rates, interest rates, or trade policies to manage inflationary pressures effectively. https://www.econjournals.com.tr/index.php/ijeep/article/view/15686Inflation, Oil Price Shocks, TVP-VAR Model, Markov-Switching, OAPEC |
| spellingShingle | Marwa Elsherif Modelling Inflation Dynamics and Global Oil Price Shocks in OAPEC Countries: TVP-VAR International Journal of Energy Economics and Policy Inflation, Oil Price Shocks, TVP-VAR Model, Markov-Switching, OAPEC |
| title | Modelling Inflation Dynamics and Global Oil Price Shocks in OAPEC Countries: TVP-VAR |
| title_full | Modelling Inflation Dynamics and Global Oil Price Shocks in OAPEC Countries: TVP-VAR |
| title_fullStr | Modelling Inflation Dynamics and Global Oil Price Shocks in OAPEC Countries: TVP-VAR |
| title_full_unstemmed | Modelling Inflation Dynamics and Global Oil Price Shocks in OAPEC Countries: TVP-VAR |
| title_short | Modelling Inflation Dynamics and Global Oil Price Shocks in OAPEC Countries: TVP-VAR |
| title_sort | modelling inflation dynamics and global oil price shocks in oapec countries tvp var |
| topic | Inflation, Oil Price Shocks, TVP-VAR Model, Markov-Switching, OAPEC |
| url | https://www.econjournals.com.tr/index.php/ijeep/article/view/15686 |
| work_keys_str_mv | AT marwaelsherif modellinginflationdynamicsandglobaloilpriceshocksinoapeccountriestvpvar |