IMF paper explores second-round effects of oil shocks
Authors find oil shocks have greater impact where inflation is already high
The pass-through of oil shocks to inflation varies with the state of an economy and its structure, new research published by the International Monetary Fund finds.
IMF economists Chikako Baba and Jaewoo Lee analyse quarterly data on 39 European countries to estimate the impact of oil shocks. They note the “lion’s share” of the recent surge in European inflation has been driven by energy prices, raising the importance of understanding whether second-round effects could entrench inflation.
The
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