Forum On Emerging Issues
The Sensitivity of the General Price Level to Changes in the Price of Crude Oil
There are many
direct and indirect effects of changing
crude oil prices on the inflation rate, so
it is not surprising that there are different
views about the resulting
effects on the general price level and
also on other aspects of the general
economy. This study,
estimates the direct and indirect
effects of oil price changes on the
economy-wide rate of inflation,
which then has effects on spending
and producing decisions. However,
in this forum, we do not try to estimate
the full indirect effects on the
level of economic activity, such as
effects on real GDP.