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Oil Price Pass-Through into Inflation: The Evidence from Oil Exporting Countries

Tural Karimli, Nigar Jafarova, Heyran Aliyeva and Salman Huseynov ()
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Salman Huseynov: Center for Research and Development, Central Bank of the Republic of Azerbaijan

No 01-2016, IHEID Working Papers from Economics Section, The Graduate Institute of International Studies

Abstract: This paper evaluates different channels of oil price pass through into inflation for the countries Azerbaijan, Kazakhstan and Russia. We propose a methodology to disentangle the effects of different channels after an oil price shock hits international markets. We measure the relative importance of the two distinct channels through which oil price shocks are transmitted into inflation in these economies. For that, we employ an approach which is in the spirit of the methodology proposed by Sims and Zha (1995). The empirical evidence shows that the level of inflation in these oil-exporting countries responds significantly to oil price shocks. The fiscal and cost channels are major amplifiers of the effects of oil price shocks on inflation. By providing new evidence from emerging oil-exporting countries, the paper also has important policy implications on the maintenance of price stability by central banks.

Pages: 25 pages
Date: 2016-02-21
New Economics Papers: this item is included in nep-cis, nep-cwa and nep-ene
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Citations: View citations in EconPapers (5)

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