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moeti damane

@iamSANhedrin

, 9 tweets, 12 min read

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Lets talk about #Oil and #Inflation and whether the relationship is #Linear or #NonLinear...

We have all been witness to the recent volatility in the #Global #Oil markets. We have seen how disruptions in oil #Supply, be it from #SaudiArabia, #Nigeria, #Venezuela, #Iran or #Libya can cause upticks in the global #Price of oil...

On the same token, we are aware how muted #oil #demand can arise from a slow down in #global #growth. For e.g. a persistent slowdown in #China often translates into a softening of global oil prices. Similarly, high #inventories & the impact of #US #shale drives down prices...

all things considered, I have become quite interesting in #modelling the relationship between #global #oil #prices & #domestic #inflation...#Lesotho #Imports petroleum products on an #ImportPriceParity basis. Thus, fluctuations in global oil prices affect the country directly...

My hypothesis: The relationship between #oil #prices and #inflation in #Lesotho is #NonLinear. That is to say, the effect an increase in the price of oil has on inflation is not the same as the effect a decrease in the oil price has on the same...

The intricacies of the relationship between #Lesotho and #SouthAfrica notwithstanding, I aim to emply a #NonLinear #Autoregressive Distributed #Lag (#ARDL) model to reveal the true relationship between #Oil #Prices and #Inflation in #Lesotho...

From a #policy perspective, even though the bulk of #Lesotho's #Inflation is imported from #SouthAfrica, the supply shocks, in this case, shocks to the oil price are arguably #idiosyncratic & thus could permeate to affect the domestic component of inflation...