The Asymmetric Impact of Economic Policy and Oil Price Uncertainty on Inflation: Evidence from Developed and Emerging Economies

Christina Anderl and Guglielmo Maria Caporale

No 10276, CESifo Working Paper Series from CESifo

Abstract: This paper examines the asymmetric impact of economic policy uncertainty (EPU) and oil price uncertainty (OPU) on inflation by using a Nonlinear ARDL (NARDL) model, which is compared to a benchmark linear ARDL one. Using monthly data from the 1990s until August 2022 for a number of developed and emerging countries, we find that the estimated effects of both EPU and OPU shocks are larger when allowing for asymmetries in the context of the NARDL framework. Further, EPU shocks, especially negative ones, have a stronger impact on inflation than OPU ones and capture some of the monetary policy uncertainty, thereby reducing the direct effect of interest rate changes on inflation. Since EPU shocks reflect, at least to some extent, monetary policy uncertainty, greater transparency and more timely communications from monetary authorities to the public would be helpful to anchor inflation expectations.

Keywords: inflation; asymmetries; NARDL; oil price uncertainty; economic policy uncertainty (search for similar items in EconPapers)
JEL-codes: C22 E31 E60 (search for similar items in EconPapers)
Date: 2023
New Economics Papers: this item is included in nep-cba and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://www.cesifo.org/DocDL/cesifo1_wp10276.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_10276

Access Statistics for this paper

More papers in CESifo Working Paper Series from CESifo Contact information at EDIRC.
Bibliographic data for series maintained by Klaus Wohlrabe ().