Inflation synchronization among the G7 and China: The important role of oil inflation

Ricardo Sousa Ricardo Sousa

Ricardo Sousa

Associate Professor with Habilitation at Universidade do Minho

发布日期: 2021年6月7日
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Elsayed, A., Hammoudeh, S., Sousa, R.M. (2021), "Inflation synchronization among the G7 and China: The important role of oil inflation", Energy Economics, 100, 105332.

Abstract

We investigate the interconnectedness and spillovers between oil price inflation and CPI inflation in the G7 countries and China over the period 1987M6-2020M6. To this end, we employ the multivariate DECO-GARCH model and both time-domain and frequency-domain spillover methods. We find a reasonably high degree of integration between the oil price inflation and the CPI inflation rates. This relationship has been rising over time and, remarkably so, during oil crises and financial stress. Oil price inflation is a crucial transmitter of spillovers to CPI inflation, particularly to the US inflation, which, in turn, has a weak to mild influence on the paths of inflation of other countries. The largest (lowest) gross directional spillovers to other CPI inflation rates accrue to the US (China). Finally, the oil price inflation influences the CPI inflation over the short-end of the business cycle, but much less so over the medium- to long-ends.

Happy to share it with you HERE: https://authors.elsevier.com/c/1dBjsW3fcodEF

#inflation #oil #g7 #usa #china #spillovers #financialstress #crises #businesscycle

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