Oil price shocks and inflation: A cross-national examination in the ASEAN5+3 countries

Abstract

We test interaction between the oil price shocks and inflation in the ASEAN5+3 countries utilizing 35 years of monthly data beginning in 1987–2022. We show that when the COVID-19 pandemic is factored into our sample, oil-specific demand shocks and aggregate demand shocks had a significant impact on inflation in these countries. These findings hint that the COVID-19 pandemic is likely the fundamental cause of the inflationary impact of these shocks. The impact of rising inflation sparked by shocks emanating from oil-specific demand and aggregate demand is evident in Malaysia, Singapore, Thailand, the Philippines, and Japan. We discover evidence that inflation responds asymmetrically to oil price shocks, depending on whether the shocks are positive or negative. Our empirical findings have significant policy implications for policymakers as they provide a reasonable explanation for the ASEAN5+3 countries' inflationary responses to various oil price shocks.