What Is the Expected Impact on GDP Growth and Inflation Due to a Sharp Decline in International Oil Prices? The Case of the Greek Economy

Abstract

This note reviews the recent relevant literature and provides empirical evidence that fluctuations of the international price of oil have a significant impact on the Greek economic activity and inflation. In particular, the main conclusions that emerge from the literature review are the following: A permanent 40% reduction in the international price of oil over 3 years horizon is expected to increase on average the real GDP growth from 0.33% to 0.66%. A permanent 40% reduction in the international price of oil over 3 years horizon is expected to decrease on average the inflation from -1.45% to -1.78%.

Keywords: GDP Growth, Inflation, Oil Price, Simulation