Effect of Oil Price Pass-Through on Domestic Price Inflation: Evidence from Nonlinear ARDL Models

Abstract

We intended to demonstrate that oil price can have a different pass-through effect into domestic prices at consumer and production levels subject to an oil dependency factor. The results were compared between oil importing and oil exporting countries. The nonlinear autoregressive distributed lags (NARDL) models were used to capture the asymmetric pass-through effects of oil price increases and decreases in consumer price and producer price respectively. Our results revealed that oil price changes can have asymmetric effect on CPI inflation directly and indirectly with more influential impact of indirect effect. This result holds for both groups of countries. The effect on producer price is much larger especially in oil importing group due to the high dependence of these countries on oil. Oil price changes did lead to increases in consumer prices in oil importing countries. This may due to effective monetary policy that enhances price stickiness in the economy.

Key words: Inflation, Oil price, Asymmetric effects, Nonlinear ARDL models.
JEL: C23, E31, Q43.

Efekat prelivanja cene nafte na domaću inflaciju: dokaz na osnovu nelinearnih ARDL modela

Namera nam je bila da pokažemo da cena nafte može imati drugačiji efekat prelivanja na domaće cene na potrošačkim i proizvodnim nivoima podložnim faktoru zavisnosti od nafte. Rezultati su upoređeni između zemalja uvoznica nafte i zemalja izvoznica nafte. Nelinearni autoregresivni modeli raspoređenih docnji (NARDL) korišćeni su da bi se obuhvatili asimetrični transmisioni efekti povećanja cena nafte i smanjenja potrošačkih i proizvođačkih cena, respektivno. Naši rezultati su pokazali da promene cena nafte mogu imati asimetrični efekat na indeks potrošačkih cena (CPI) direktno i indirektno, uz značajniji uticaj indirektnog efekta. Ovaj rezultat važi za obe grupe zemalja. Uticaj na cene proizvođača je mnogo veći, posebno u grupi koja uvozi naftu, zbog velike zavisnosti ovih zemalja od nafte. Promene cena nafte dovele su do povećanja potrošačkih cena u zemljama uvoznicama nafte. To može biti rezultat efektivne monetarne politike koja povećava lepljivost cena u ekonomiji.

Ključne reči: Inflacija, cena nafte, asimetrični efekti, nelinearni ARDL modeli.