Article · Bulletin of Turan University · January 1, 2020

Empirical analysis of the influence of oil prices on inflation and currency rate

Sabit Baimaganbetov, Nazygul T. Batyrova, Bibigul Izatullayeva, Д. Н. Келесбаев

Abstract

Oil prices are one of the important factors affecting inflation and real currency exchange rates in all countries. Fluctuations in oil prices affect inflation and real currency exchange rates through factors such as supply and demand for oil. Lower oil prices have a direct effect on inflation, which causes the depreciation of the real exchange rate. With higher oil prices, the real exchange rate will rise and the import markets at cheaper prices will be opened for the country. The main reason for this is the increase in the world oil market by 1.6 million tons per day due to the expansion of the use of alternative energy sources and the new oil production method or the development of shale oil reserves. In 2017, oil prices rose again to $54, the main reason being the agreements reached between OPEC member countries and non-member oil producing countries. The deal had a positive effect on oil prices and stimulated investors' confidence in investing in this industry. In this paper, the effects of oil prices on inflation and the real exchange rate are analyzed using the Granger Cause Test and the Vector Auto Regression (VAR) methods. The Greater Reason-Tests test revealed that inflation is the cause of changes in the real exchange rate. The CAR analysis showed that there was a negative correlation between inflation and the real exchange rate, and that the effect had a duration of 4 periods.

Market Dynamics and VolatilityMonetary Policy and Economic ImpactEconomics of Agriculture and Food Marketsoil pricesinflationreal exchange rate

Empirical analysis of the influence of oil prices on inflation and currency rate

Abstract

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