Oil Price Pass-Through into Core Inflation

43 Pages Posted: 5 Dec 2017

See all articles by Cristina Conflitti

Cristina Conflitti

Bank of Italy

Matteo Luciani

Board of Governors of the Federal Reserve System

Multiple version iconThere are 3 versions of this paper

Date Written: November 29, 2017


This work estimates the effect that fluctuations in oil prices have on changes in consumer prices in both the United States and the euro area. For many of the basic items in the basket of goods used to estimate inflation, the effects of oil price trends are divided into two components: the first is linked to the specific characteristics of individual products (such as, for example, the importance of energy in the production process), while the second is related to macroeconomic factors which are in turn connected with changes in oil prices. The results show that changes in oil prices mainly pass through to core inflation (or rather to inflation excluding food and energy products) by means of macroeconomic factors; while the effect is limited, it is statistically different from zero and persists over time.

Keywords: Core inflation, oil price, dynamic factor model, pass-through, disaggregate consumer prices

JEL Classification: C32, E31, E32, Q43

Suggested Citation

Conflitti, Cristina and Luciani, Matteo, Oil Price Pass-Through into Core Inflation (November 29, 2017). Bank of Italy Occasional Paper No. 405, Available at SSRN: https://ssrn.com/abstract=3082191 or http://dx.doi.org/10.2139/ssrn.3082191

Cristina Conflitti (Contact Author)

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184

Matteo Luciani

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

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