Proceedings of The 5th International Conference on Business, Management and Finance
The Asymmetric Impact of Oil Price Dynamics On Inflation in Brazil
Jephthah O. Osei
This study investigates whether changes in oil price exert asymmetric pass-through effects on inflation using quarterly data from 2000Q1 to 2021Q4 in Brazil. It fits a nonlinear Autoregressive Distributed Lag (NARDL) model capable of simultaneous decomposition of oil price into its partial sum of positive and negative components to capture both the short-run and long-run asymmetry behaviour of inflation. The empirical results reveal the existence of a nonlinear or asymmetric effect of oil price pass-through to inflation from the short-run to the long-run. The finding suggests that monetary authority should account for asymmetric effects of inflation and oil price nexus.
keywords: Asymmetric, Oil Price, Dynamics, Inflation, Brazil.