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Oil Price Shocks and Inflation: A DSGE Insight from the 2022 Eurozone Energy Crisis

Wang, Yirong
(2023)

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WANG_04332200_2023.pdf
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WANG_04332200_2023_Dynare.pdf
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Details

Supervisors
Oikonomou, Rigas
Faculty
Faculté des sciences économiques, sociales, politiques et de communication
Degree label
Master [120] en sciences économiques, orientation générale, à finalité approfondie
Abstract
This research investigates the relationship between oil price fluctuations and inflation dynamics, particularly in the context of the 2022 Eurozone inflation spurred by the Russo-Ukrainian conflict. Utilizing a New Keynesian open two-country DSGE model, we emphasize oil's integral role in production processes, offering insights into how inflation and wider macroeconomic indicators respond to oil price shocks. Our results analysis shows the pathways of transition. Two pathways were discerned for rising oil prices impacting inflation: a direct channel where increased oil prices inflate end-consumer basket goods costs and an indirect one where firms adjust their input ratios in response to oil price variations. The revelations from our research are crucial for crafting informed monetary policies and enrich the academic foundation for future inquiries in the field.