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Inflationary effects of changes in the price of oil: The case of Sweden
Jönköping University, Jönköping International Business School.
Jönköping University, Jönköping International Business School.
2006 (English)Independent thesis Basic level (degree of Bachelor), 10 points / 15 hpStudent thesis
Abstract [en]

Motivated by a period of time in which we face historically high oil prices, this thesis analyzes to what extent oil prices actually influence inflation. By constructing a simple chart, one can see that oil price and inflation seem to have a similar pattern. However, to draw any conclusions from that is impossible. We show with econometric methods the relationship between oil prices and inflation in the case of Sweden.

Sweden, as a net importer of oil, spent approximately 43.3 billion SEK on crude oil during 2004. That is 414.200 barrels of crude oil each day. Taking this into account, what would happen if the oil price suddenly increased by 10%? Considering the fact that 43.3 billion SEK is a rather large amount of money, it seems obvious that such an oil price increase should have some impact on the Swedish economy and inflation. This would occur partly through higher prices of gasoline for example, but it would occur also due to the indirect effect that companies face through higher production costs and will most likely pass on some part of that cost to the consumers.

We have gathered data for oil prices and inflation for Sweden since 1981 to 2004. Together with other variables that also affect the inflation, such as money supply and interest rates, we did econometric regressions to find evidence for the relationship. We reach the conclusion that if the oil prices increase by 10%, inflation is assumed to increase with about 0.15-0.20%.

Place, publisher, year, edition, pages
2006. , 21 p.
Keyword [en]
Oil price, inflation, macroeconomic effects
National Category
Economics
Identifiers
URN: urn:nbn:se:hj:diva-746OAI: oai:DiVA.org:hj-746DiVA: diva2:4476
Uppsok
samhälle/juridik
Supervisors
Available from: 2007-03-16 Created: 2007-03-16

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CiteExportLink to record
Permanent link

Direct link
Cite
Citation style
  • apa
  • harvard1
  • ieee
  • modern-language-association-8th-edition
  • vancouver
  • Other style
More styles
Language
  • de-DE
  • en-GB
  • en-US
  • fi-FI
  • nn-NO
  • nn-NB
  • sv-SE
  • Other locale
More languages
Output format
  • html
  • text
  • asciidoc
  • rtf