Empirical Investigation of Relationship between Oil Price and Inflation: The case of India


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Authors

  • Zafar Ahmad Sultan Babasaheb Bhim Rao Ambedkar Bihar University, Muzaffarpur, Bihar, India
  • Tarek Tawfek Yousef Alkhateeb Department of Marketing, College of Business Administration, Prince Sattam Bin Abdulaziz University, Alkharj, Saudi Arabia
  • Mahmoud Mohamed Fawaz Department of Agricultural Economics,Kafrelsheikh University, Kafrelsheikh 33511, Egypt.

Abstract

India is once again facing the problem of rising price of crude oil since 2017 after enjoying low price since 2014. This period has also witnessed moderate rate of inflation in the economy. It is argued that rise in crude oil price also affect the inflation level in the country. The paper using data from 1970 to 2017 intends to examine the relationship between oil price and inflation level in the country. The paper has used Johansen cointegration method to investigate the long run association between the two. It is found that oil price does affect the inflation level in India both in the short run as well as in the long run. In a situation when country is facing problem of decreasing demand for consumption as well as of investment, rise in oil price and its pass through in the form rise in general price level may further deepen the crisis. To increase the demand and keeping the inflation at moderate level the government needs to manage the domestic oil price without transferring the burden on the people. In this light, the government is also required to incentivise the development of alternate source of energy and the technology to economise the use of energy.Keywords: Oil Price, Inflation, Cointegration.JEL Classification: EDOI: https://doi.org/10.32479/ijeep.9015

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Author Biographies

Zafar Ahmad Sultan, Babasaheb Bhim Rao Ambedkar Bihar University, Muzaffarpur, Bihar, India

Associate Professor, Department of Economics, L.S. College, Muzaffarpur, abasaheb Bhim Rao Ambedkar Bihar University, Muzaffarpur, Bihar, India

Tarek Tawfek Yousef Alkhateeb, Department of Marketing, College of Business Administration, Prince Sattam Bin Abdulaziz University, Alkharj, Saudi Arabia

Assistant Professor, Department of Marketing, College of Business Administration, Prince Sattam Bin Abdulaziz University, Alkharj, Saudi Arabia

Mahmoud Mohamed Fawaz, Department of Agricultural Economics,Kafrelsheikh University, Kafrelsheikh 33511, Egypt.

Professor of Agricultural Economics,Kafrelsheikh University, Kafrelsheikh 33511, Egypt. Email

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Published

2020-03-17

How to Cite

Sultan, Z. A., Alkhateeb, T. T. Y., & Fawaz, M. M. (2020). Empirical Investigation of Relationship between Oil Price and Inflation: The case of India. International Journal of Energy Economics and Policy, 10(3), 90–94. Retrieved from https://econjournals.com/index.php/ijeep/article/view/9015

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