The macroeconomic effects of changes in petrol prices: The case of EU and Turkey

Abstract

Energy especially petrol is important input for production. The first (1973) and second (1978) petrol crises affected all of world economies. Petrol prices have important effects on macroeconomic activity. The demand on petrol in the process from daily consumption to the production increases rapidly. The way of meeting this demand by using petrol is expected to slowdown starting from 2030-2040. Additionally, changes in crude oil prices give different results respectively in countries that export, transport and import. In petrol-export and import countries, rise and decline in petrol prices can have positive and negative effects. Recent volatility in crude oil prices also changes growth, inflation and expectations significantly. In this study it is going to be analyzed how the EU and Turkish growth rate and inflation are affected from the changes of petrol prices with econometric models. In the test conducted by using the time series between the years 1980 and 2006, the differences of the variables were also taken however it was concluded that the increase in crude oil prices is not the cause for increase in GDP and CPI. The analysis will be addressed asymmetric relationships between oil prices and the macroeconomy. © Common Ground, Halil Ozekicioglu, All Rights Reserved.