Estimation of the Price Elasticity of Oil

Billede af publikationens forside
23-11-2022
MAKRO Makroøkonomi Christian Kastrup Kristina Poulsen Tamás Vasi

I dette arbejdspapir estimeres gennemslag fra oliepriser til importpriser for hver branche i MAKRO ved hjælp af Kalman-filter-metoden udviklet af Kastrup, Kronborg og Stephensen (2022).

Abstract

We estimate the oil price elasticity for import prices for the sectors present in MAKRO. In line with MAKRO, we assume price stickiness in the dynamics of import prices in order to allow for short-run and long-run effects. In order to estimate the oil price elasticity, we make use of a Kalman filter approach developed by Kastrup, Kronborg, and Stephensen (2022). We estimate the oil price elasticity for the combined sectors in MAKRO to approximately 0.21. However, we find heterogeneity across sectors. Not surprisingly, import prices in the energy and extraction sectors have the highest oil price elasticity, while changes in oil prices appear to have a minor impact on import prices in the production and service sectors. These estimates are robust to a set of robustness tests, such as changing the time period and applying different estimation approaches.