How macroeconomic factors drive the linkages between inflation and oil markets in global economies? A multiscale analysis

Walid Mensi, Mobeen Ur Rehman, Shawkat Hammoudeh, Xuan Vinh Vo and Won Joong Kim

International Economics, 2023, vol. 173, issue C, 212-232

Abstract: This paper examines the nonlinear relationships between oil and inflation for twelve major global economies in the presence of important macroeconomic variables. Using the nonparametric quantile causality approach, we show strong evidence of causality-in-variance from inflation to changes in oil prices for all economies across different quantiles with the exception of Australia. On the other hand, evidence of a causality-in-mean from oil to inflation is identified for Australia, Canada, Greece, the UK, and the US and a causality-in-variance in the same direction for almost all economies, exhibiting a hump-shaped pattern across the quantiles. Results for partial and multivariate wavelet approaches show that the macroeconomic factors drive and accentuate the oil-inflation co-movements under all frequencies and over time. These results have significant implications for investors and policy makers.

Keywords: Oil; Inflation; Macroeconomic factors; Nonparametric quantile causality; Partial and multivariate wavelets (search for similar items in EconPapers)
JEL-codes: C1 E1 Q4 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:inteco:v:173:y:2023:i:c:p:212-232

DOI: 10.1016/j.inteco.2022.12.003

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