The Unassuming Economist

From a new paper by Caner Demir and, Raif Cergibozan:

“In this paper, we present the results of a study examining whether the European Union, where countries act in common on many issues such as monetary policy, abolition of borders and mobilization of labour and capital, also constitutes a union in terms of energy security. From this point of view, whether the energy security risk in the European Union has converged or not is tested by using various analysis methods covering the period 1980–2018 for 17 EU countries. The findings of the study not only reveal whether individual countries converge to the group average but also show whether the group as a whole forms a convergent outlook. The linear unit root analysis indicates that each country is in a stochastic convergence process towards the group average. In addition, time series beta convergence analysis, which takes into account country-specific structural break periods, is applied and the convergent-divergent situation of each country before and after the break is revealed. Following this determination of individual countries, whether the sample as a whole constitutes a convergent process is tested with sigma and panel beta convergence models and it is determined that the 17 countries subject to the analysis form a convergent outlook as a whole. A robustness check is also made via a nonlinear time series analysis and the previous findings are confirmed.”

From a paper by Cheol-Keun Cho and Myunghyun Kim:

“We consider a proxy FAVAR (Factor-Augmented Vector Autoregression) model to analyze the
impact of an oil supply news shock on the Korean economy. To identify an oil supply news shock, we
use the variation in oil futures prices around OPEC production announcements as a proxy. Moreover, we
include a factor that captures the common movement of many Korean macro variables such as various
price indices and investment. The estimation results of the proxy FAVAR model show that an oil supply
news shock increases the real oil price and the US CPI, and decreases world oil production and US GDP.
As for Korean macro variables, GDP and net exports fall and CPI increases in response to the shock.”

From a paper by Puneet Vatsa:

“I use a structural vector autoregression model to analyse the links between oil prices, petrol prices, inflation, inflation perceptions, and inflation expectations in New Zealand. Findings reveal that although inflation expectations are sensitive to shocks to oil prices, petrol prices, and inflation itself, they are considerably more sensitive to inflation perception shocks. Shocks to inflation perceptions explain 54% of the forecast error variance in inflation expectations after one quarter and 37% after 18 months. The results underscore the importance of including inflation perceptions in models seeking to account for inflation expectations and their associations with energy prices.”

From a paper by Guilherme Spinato Morlin, Marco Stamegna, and Simone D’Alessandro:

“The surge in energy prices following the Russian-Ukrainian conflict triggered the most significant inflation in advanced economies in recent decades. Using the Eurogreen model for the Italian economy, we examine the macroeconomic and distributional impacts of rising energy prices alongside two policy measures: wage indexation and a temporary housing rent cap. We compare policy scenarios with a baseline reflecting the observed price shocks. We find that: i) energy price shocks disproportionately affect lower-income individuals due to the larger share of energy goods in their consumption baskets; ii) wage indexation results in higher average real wages compared to the baseline scenario, without triggering inflation acceleration, while temporarily boosting output and employment by supporting aggregate demand; iii) a temporary housing rent cap improves distribution in workers’ favor while reducing inflation; iv) both policies have a more substantial effect for low-skilled workers; and v) best outcomes appear when these policies are jointly implemented.”

From a paper by Oussama Ritahi, and Abdellah Echaoui:

“This study examines the impact of Brent oil price shocks on key economic variables—namely inflation, GDP, exchange rate, trade openness, and unemployment rate using annual data from 1990 to 2022. The results of the study show that the variables considered under this study are cointegrated in the long-run which means that there is a relationship between these variables in the long-run. By employing a vector error correction model (VECM), we analyze the impulse response functions to understand the short- and long-term effects of oil price fluctuations on these economic indicators. Our findings reveal that Brent oil price increases lead to higher inflation and depreciation of the exchange rate, with both effects persisting in the short and long run. Conversely, GDP experiences a consistent negative impact from oil price hikes, suggesting a detrimental effect on economic growth over time. Trade openness shows a positive response, indicating increased trade activity due to rising oil prices. Additionally, the unemployment rate decreases in response to higher oil prices, reflecting a potential reduction in joblessness.”