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Article: Do high oil prices presage inflation? The evidence from G-5 countries.
- Article from:
- Business Economics
- Article date:
- April 1, 2004
- Author:
CopyrightCOPYRIGHT 2004 The National Association for Business Economists. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. (Hide copyright information)
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We estimate the effects of oil price changes on inflation for the United States, United Kingdom, France, Germany, and Japan using an augmented Phillips curve framework. We supplement the traditional Phillips curve approach taking into account the growing body of evidence suggesting that oil prices may have asymmetric and nonlinear effects on output and that structural instabilities may exist in those relationships. Our statistical estimates suggest current oil price increases are likely to have only a modest effect on inflation in the United States, Japan, and Europe. Oil price increases of as much as 10 percentage points will lead to direct inflationary increases of about ...