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Inflation, oil prices, and economic activity in recent crisis: Evidence from the UK

Ahmed, Rizwan; Chen, Xihui Haviour; Kumpamool, Chamaiporn; Nguyen, Dung T.K.

Authors

Rizwan Ahmed

Xihui Haviour Chen

Chamaiporn Kumpamool

Dung T.K. Nguyen



Contributors

Abstract

This study examines the link between inflation and the macroeconomy such as output, trade balance and unemployment as reflected through crude oil prices. Using monthly data from the UK spanning January 2010 to June 2022, we apply a combination of three analyses including the VAR model, time-varying VAR analysis, and time-varying panel model with robustness. The results reveal that in the event of inflation shocks the other economic indicators decrease initially. However, Brent crude oil shocks are the quickest in responding to surging inflation compared to other proxies, rebounding to a positive level in only one month. Furthermore, the impact of inflation shocks is strong in the first quarter but diminishes in the long run. This information can be used to inform and assist policymakers to develop policies that mitigate the negative effects of inflation in the short term. Our findings also have important implications for businesses operating in the UK in making strategic decisions.

Citation

Ahmed, R., Chen, X. H., Kumpamool, C., & Nguyen, D. T. (2023). Inflation, oil prices, and economic activity in recent crisis: Evidence from the UK. Energy Economics, 126, Article 106918. https://doi.org/10.1016/j.eneco.2023.106918

Journal Article Type Article
Acceptance Date Jul 23, 2023
Online Publication Date Aug 9, 2023
Publication Date 2023-10
Deposit Date Mar 4, 2024
Publicly Available Date Mar 5, 2024
Journal Energy Economics
Print ISSN 0140-9883
Publisher Elsevier
Peer Reviewed Peer Reviewed
Volume 126
Article Number 106918
DOI https://doi.org/10.1016/j.eneco.2023.106918
Keywords General Energy; Economics and Econometrics
Additional Information This article is maintained by: Elsevier; Article Title: Inflation, oil prices, and economic activity in recent crisis: Evidence from the UK; Journal Title: Energy Economics; CrossRef DOI link to publisher maintained version: https://doi.org/10.1016/j.eneco.2023.106918; Content Type: article; Copyright: © 2023 The Author(s). Published by Elsevier B.V.