Second-Round Effects of Oil Price Shocks -- Implications for Europe’s Inflation Outlook

Chikako Baba and Jaewoo Lee

No 2022/173, IMF Working Papers from International Monetary Fund

Abstract: The pass-through effects of oil price shocks on wage and consumer price inflation vary with the states or structural characteristics of an economy. The effects have declined over time in Europe and been higher in emerging European economies than in advanced economies. The pass-through to wages is found to have been higher when the prevailing level of inflation was higher or when the degrees of unionization and centralized bargaining were higher, while lower under a higher credibility of monetary policy. The effects of oil price shocks on core inflation and inflation expectations are consistent with their effects on wages.

Keywords: Second-round effects; oil prices; wages; inflation; pass-through; monetary policy; impulse response.; oil price shock; inflation expectation; pass-through effect; oil price inflation; consumer price inflation; Unemployment rate; Nominal effective exchange rate; Europe; Global (search for similar items in EconPapers)
Pages: 40
Date: 2022-09-09
New Economics Papers: this item is included in nep-ene and nep-mon
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