The Comovement between Fuel Prices and the General Price level in Australia

Lei Lei Song

Melbourne Institute Working Paper Series from Melbourne Institute of Applied Economic and Social Research, The University of Melbourne

Abstract: This paper examines the relationship between the general price level and the relative price of fuel by measuring correlation from VAR forecast errors. The results suggest a significant positive correlation between quarterly changes in the relative price of fuel and the CPI, at least in the short to medium term from two to four years. The finding has important implications for measuring the long-term trend in inflation as relative price changes in fuel contain important information about future inflation.

JEL-codes: E31 E37 (search for similar items in EconPapers)
Pages: 13 pages
Date: 2006-08
New Economics Papers: this item is included in nep-cba, nep-ene, nep-for and nep-mac
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Persistent link: https://EconPapers.repec.org/RePEc:iae:iaewps:wp2006n17

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