Asymmetric effects of oil prices on inflation in Côte d’Ivoire

Abstract

This study examines the asymmetric effects of both international and local oil prices on the inflation rate in Côte d’Ivoire over the period 2005–2022. A nonlinear autoregressive distributed lag (NARDL) model is used to account for the asymmetric effects and analyse both long run and short run effects of oil prices on inflation. The results indicate that in the long run, an increase in international and local oil prices results in an increase in inflation rate, with higher effect for local oil prices. In addition, long run effects of a negative oil price variation on inflation have a greater magnitude than that of a positive one. The effects on inflation of Brent and diesel are statistically symmetrical. It is also found that the inflationary effects of diesel prices are greater than those of other petroleum products. Policy recommendations are provided based on the empirical results of the paper.