Time-Varying Impact of Commodity Prices on Output Growth and Inflation in the Eastern European Countries

Roman Kopych and Viktor Shevchuk ()
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Roman Kopych: Department of International Economic Relations, Lviv University of Trade and Economics, 10 Tuhan-Baranovskoho Str., 79-005 Lviv, Ukraine
Viktor Shevchuk: Council of Social Studies, Cracow University of Technology, 24 Warszawska Str., 31-155 Cracow, Poland

Commodities, 2023, vol. 3, issue 1, 1-17

Abstract: Using quarterly data for the 2002–2022 period, we estimate the output and inflation effects of several commodity prices (agricultural raw materials, crude oil, and metals) for 8 Eastern European countries with different exchange rate regimes. The Kalman filter is used for estimating the time-varying parameters. Our main findings can be summarized in the following way: (i) higher crude oil prices are inflationary in most of the countries (except Slovakia), with a stronger price effect since 2020; (ii) crude oil prices are neutral with respect to output growth in 4 out of 8 countries, with an expansionary effect in Croatia, Slovenia, and Romania, as well as a contractionary effect in Slovakia, but the crude oil shock of 2021–2022 seems to be expansionary in almost all countries (except Slovakia), regardless of the exchange rate regime practiced; (iii) inflation and output effects of metals prices are quite heterogeneous across countries; (iv) agricultural raw material prices play a role in both inflation and output growth only in Bulgaria and Poland. Since 2021, a growing inflationary impact of crude oil prices suggests a stronger monetary policy reaction to the oil shock, especially in the presence of its favorable output effect.

Keywords: commodity prices; output; inflation; Kalman filter; Eastern Europe (search for similar items in EconPapers)
JEL-codes: C0 C1 C2 C3 C4 C5 C6 C7 C8 C9 D4 E3 E6 F0 F1 F3 F4 F5 F6 G1 O1 O5 Q1 Q2 Q4 (search for similar items in EconPapers)
Date: 2023
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