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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. (2023) Inflation, oil prices, and economic activity in recent crisis: Evidence from the UK. Energy Economics, 126 . Article Number 106918. ISSN 0140-9883. (doi:10.1016/j.eneco.2023.106918) (KAR id:103368)

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.

Item Type: Article
DOI/Identification number: 10.1016/j.eneco.2023.106918
Uncontrolled keywords: Inflation, Oil price, Energy consumption, Unemployment, Trade balance, Economic growth, UK economy
Subjects: H Social Sciences > HG Finance
Divisions: Divisions > Kent Business School - Division > Department of Accounting and Finance
Funders: University of Kent (https://ror.org/00xkeyj56)
Depositing User: Rizwan Ahmed
Date Deposited: 20 Oct 2023 14:56 UTC
Last Modified: 08 Jan 2024 23:59 UTC
Resource URI: https://kar.kent.ac.uk/id/eprint/103368 (The current URI for this page, for reference purposes)

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