Year: 2025
Type: article
Abstract: Previous literature suggests that the pass‐through of oil price shocks to inflation rates became weaker since the 1970s. I use a time‐varying parameter VAR to show that this trend has recently been reversed with headline and core inflation rates responding more sensitive to oil price shocks. Based on a counterfactual analysis, I offer evidence that increasingly important second round effects propagated via inflation expectations play a key role for these dynamics. Finally, I illustrate that oil price shocks in general and this expectation channel more specifically contributed substantially to the recent surge in inflation rates.
Source: Economic Inquiry
DOI: 10.1111/ecin.70030
Author: Daniel Gründler
Institution: Universität Innsbruck
Language: English
Subfield: Economics and Econometrics
Domain: Social Sciences
Open Access status: hybrid
Estimated APC paid: $3,400
OpenAlex ID: W4416171631