Oil discoveries drive persistent inflation increases – BIS paper
Price effects of energy discoveries concentrated in economies with inflexible exchange-rate regimes
News of a large oil and gas discovery leads to a persistent increase in inflation over the following decade, according to new research from the Bank for International Settlements.
In a working paper published on October 23, authors Bohou Cai, Liugang Sheng and Hongyan Zhao find that news of an energy discovery “sets in motion a broad macroeconomic adjustment” before any production has started. “Domestic absorption rises, the current account initially weakens, and the real exchange rate
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