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

Philipp Kartaev () and Ilya Medvedev ()
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Philipp Kartaev: MGIMO-University, Moscow, Russia
Ilya Medvedev: MGIMO-University, Moscow, Russia

Russian Journal of Economics, 2019, vol. 5, issue 3, 211-219

Abstract: 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.

Keywords: oil prices; inflation targeting; exchange rate; pass-through effect; monetary policy. (search for similar items in EconPapers)
JEL-codes: C23 C33 E31 E52 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:arh:jrujec:v:5:y:2019:i:3:p:211-219

DOI: 10.32609/j.ruje.5.47349

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