Fractional Cointegration between Energy Exports to the Euro Area and Inflation Rate Persistence
Year: 2024
Type: article
Abstract: This study aims to analyse the degree of persistence in the energy exports in in energy exporting countries to the European region along with the inflation rates persistence.We have also focused attention on the relationship between the two variables in the most important countries exporting energy to the EU area (Algeria, Norway, Russia, Libya, Saudi Arabia, Nigeria, and the United Kingdom).The methodology used deals with long-memory processes and is based on the concepts of fractional integration and fractional cointegration.Our results showed that inflation persistence of energy-exporting does not appear to increase due to energy exports shocks for the case of the UK, Nigeria, Saudi Arabia and Algeria, suggesting that the monetary policies of these countries accommodates energy exports shocks, and may not necessarily be changed due to energy exports shocks.As for the case of Norway case, that the effect of the energy exports shock on the inflation rate persistence this country will last for a short period.As for the case of ( Libya and Russia) , the shock duration has a lasting effect, as energy exports shocks cause permanent inflation rate persistence in these countries.Our results also show that countries operating floating regime with inflation targeting (IT&FR) have higher inflation persistence than countries operating pegged exchange rate regime with non-inflation targeting monetary policy (NIT&PR).Meanwhile, we also found that energy-exports countries in the EU area operating non-inflation targeting monetary policy (NIT&PR) like Norway tend to have short memory inflation persistence (d < 0.5), unlike their energyexporting counterparts (such as UK, Saudi Arabia, Nigeria, and Algeria) which tend to have long memory temporary inflation persistence (0.5 ≤ d < 1); and (Libya and Russia) which tend to long memory permanent inflation persistence (d >1).
Authors: BENKHELOUF Rachid, SAHED Abdelkader
Language: English
Domain: Social Sciences
SDG: Climate action
Open Access status: diamond
OpenAlex ID: W4405567479