An Empirical Note on the Inflation Impact of the Price of Imported Crude Oil: The Case of Germany

Cebula, Richard and Saadatmand, Yassaman and Piccone, Yvonne (2002): An Empirical Note on the Inflation Impact of the Price of Imported Crude Oil: The Case of Germany. Published in: Rivista Internazionale di Scienze Economiche e Commerciali , Vol. 49, No. 4 (28 December 2002): pp. 531-537.

Abstract

This study empirically investigates whether the assumption of the monetary authority in pre-2000 Germany that rising prices of imported crude oil would lead to domestic inflation in Germany had validity. In a model where unemployment rate changes, money stock growth, and wage growth are all allowed for, OLS estimation reveals that although the inflation rate in Germany typically is not sensitive to increasing prices on imported crude oil, crude oil price "shocks" of 50 percent or more during any calendar year have in the past led to significant domestic inflation for the German economy.

• Item Type: MPRA Paper
• Language: English
• Keywords: inflation; price of imported crude oil; oil price shocks; Germany
• Subjects: E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E31 - Price Level ; Inflation ; Deflation; E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E51 - Money Supply ; Credit ; Money Multipliers; E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E52 - Monetary Policy

References

ABEL A.B. and BERNANKE B.S., Macroeconomics, Boston, MA: Addison -Wesley, 1995.

CEBULA R.J., "A Brief Empirical Note on the Impact of Crude Oil Prices on Domestic Inflation: The Case of the United States, 1965-1999", Economia Internazionale, 2000, 53, pp. 449-54.

CEBULA R.J. and FREWER M., "Oil Imports and Inflation: An Empirical International Analysis of the 'Imported Inflation' Thesis", Kyklos, 1980, 33, pp. 615-22.

COUNCIL OF ECONOMIC ADVISORS, Economic Report of the President, 2001, Washington, D.C.: U.S. Government Printing Office, 2001.

MANKEW N.G., Macroeconomics, New York, NY: Worth Publishers, 1997.

U.S. DEPARTMENT OF COMMERCE, Statistical Abstract of the United States, 1971-2001, Washington, D.C.: U.S. Government Printing Office.

WHITE H., "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity ", Econometrica, 1980, 48, pp. 817-38.

WILLIAMSON S.D., Macroeconomics, Boston, MA: Addison-Wesley, 2002.