Empirical Investigation of Relationship between Oil Price and Inflation: The case of India

Zafar Ahmad Sultan, Tarek Tawfek Yousef Alkhateeb and Mahmoud Mohamed Fawaz
Additional contact information
Zafar Ahmad Sultan: Department of Economics, Langat Singh College, B.R. Ambedkar Bihar University, Muzaffarpur, Bihar, India,
Tarek Tawfek Yousef Alkhateeb: Department of Marketing, College of Business Administration, Prince Sattam Bin Abdulaziz University, Alkharj, Saudi Arabia,
Mahmoud Mohamed Fawaz: Kafrelsheikh University, Kafrelsheikh 33511, Egypt.

International Journal of Energy Economics and Policy, 2020, vol. 10, issue 3, 90-94

Abstract: India is once again facing the problem of rising price of crude oil since 2017 after enjoying low price since 2014. This period has also witnessed moderate rate of inflation in the economy. It is argued that rise in crude oil price also affect the inflation level in the country. The paper using data from 1970 to 2017 intends to examine the relationship between oil price and inflation level in the country. The paper has used Johansen cointegration method to investigate the long run association between the two. It is found that oil price does affect the inflation level in India both in the short run as well as in the long run. In a situation when country is facing problem of decreasing demand for consumption as well as of investment, rise in oil price and its pass through in the form rise in general price level may further deepen the crisis. To increase the demand and keeping the inflation at moderate level the government needs to manage the domestic oil price without transferring the burden on the people. In this light, the government is also required to incentivise the development of alternate source of energy and the technology to economise the use of energy.

Keywords: Oil Price; Inflation; Cointegration. (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
https://www.econjournals.com/index.php/ijeep/article/download/9015/5000 (application/pdf)
https://www.econjournals.com/index.php/ijeep/article/view/9015/5000 (text/html)

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:eco:journ2:2020-03-11

Access Statistics for this article

International Journal of Energy Economics and Policy is currently edited by Ilhan Ozturk

More articles in International Journal of Energy Economics and Policy from Econjournals
Bibliographic data for series maintained by Ilhan Ozturk ().