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An Empirical Note on the Impact of the Price of Imported Crude Oil on Inflation in the United Kingdom

Author

Listed:
  • Cebula, Richard
  • McGrath, Richard
  • Saadatmand, Yassamand
  • Toma, Michael
Abstract
This study empirically investigates whether the assumption by the Bank of England that rising prices of imported crude oil lead to domestic inflation in the United Kingdom has had validity. In a model where real GDP growth and money stock growth are both all allowed for, empirical estimation reveals compelling evidence for the validity of this assumption. In particular, the greater the percentage increase in imported crude oil prices, the greater the domestic inflation rate. In addition, oil shocks involving imported crude oil price hikes of 40 percent or more in a given year further elevate the domestic inflation rate.

Suggested Citation

  • Cebula, Richard & McGrath, Richard & Saadatmand, Yassamand & Toma, Michael, 2001. "An Empirical Note on the Impact of the Price of Imported Crude Oil on Inflation in the United Kingdom," MPRA Paper 58075, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:58075
    as

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    File URL: https://mpra.ub.uni-muenchen.de/58075/1/MPRA_paper_58075.pdf
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    References listed on IDEAS

    as
    1. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-838, May.
    2. repec:bla:kyklos:v:33:y:1980:i:4:p:615-22 is not listed on IDEAS
    3. Cebula , Richard J., 2000. "A Brief Empirical Note on the Impact of Crude Oil Prices on Domestic Inflation: The Case of the United States, 1965-1999," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 53(4), pages 449-454.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    inflation; imported crude oil; oil price shocks;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • Q37 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Issues in International Trade

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