Oil Price Pass-through into CPI Inflation in Asian Emerging Countries: The Discussion of Dramatic Oil Price Shocks and High Oil Price Periods

This study estimated the pass-through effect of oil prices on CPI inflation in emerging Asian countries. Under the framework of the standard Phillips Curve, we found that the oil prices have a significant long-run pass-through effect on CPI inflation in most countries. However, the short-run oil price pass-through was not significant but changes obviously during certain periods. Therefore, this study classified case studies into two categories for further investigation: dramatic oil price shocks and high oil price periods. We were unable to directly determine whether the severity of oil shocks has a definite influence on short-run passthrough. During periods of high oil prices, however, the prices of oil showed higher short-run pass-through. We surmised that this is because oil is a necessary commodity and persistently high oil prices crowd out the consumption of other products, increasing the weighted value of oil-related products in CPI, resulting in higher short-run pass-through effect.