Does Oil Price Shock Drive Inflation? Evidence from G20 Countries

Huimin Cao (), Farman Ullah Khan (), Parvez Ahmed Shaikh (), Faridoon Khan (), Mahjabeen Zehri () and Hazrat Yousaf ()
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Huimin Cao: China University of Mining and Technology
Farman Ullah Khan: COMSATS University
Parvez Ahmed Shaikh: Lasbela University of Agriculture, Water & Marine Sciences
Faridoon Khan: Pakistan Institute of Development Economics
Mahjabeen Zehri: Lasbela University of Agriculture, Water & Marine Sciences
Hazrat Yousaf: Lasbela University of Agriculture, Water & Marine Sciences

Journal of the Knowledge Economy, 2025, vol. 16, issue 1, No 33, 904-924

Abstract: Abstract The current study looks at the causes of inflation by considering the implications of oil prices in the presence of money supply, oil price volatility, and gold prices in the case of G20 countries (Canada, Mexico, Russia, Japan, Brazil, and Italy) over the period 1990–2019. This study first uses the dynamic simulated ARDL model to stimulate, estimate, and plot to predict graphs of negative and positive changes occurring in the variables along with their short-run and long-run relationships. Results of the ARDL bounds test confirm a long-term relationship among oil prices, oil price shocks, money supply, gold prices, and inflation. Furthermore, the results of a novel dynamic simulated ARDL disclosed that oil prices are positively connected to inflation in selected G20 countries in the long run. On the other hand, results confirm that there is a negative and significant relationship between oil price shocks and inflation in the case of selected G20 economies. The result further revealed that gold prices exert a significant and positive impact on inflation in G20 countries in the long run. Moreover, the findings concluded that money supply has a significant nexus with inflation in the long run in the case of G20.

Keywords: Dynamic simulated ARDL; G20 Countries; Inflation; Oil prices (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s13132-024-01877-1

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