Fuel prices and economic activity: time and frequency analysis for selected European countries
Abstract
The effects of fuel prices on economic activity are still being investigated, as oil and gas are critical inputs in the production process. This study examines the relationship between fuel prices and macroeconomic aggregates both in the time domain and frequency domain in three selected countries of Germany and Poland as net oil importers and Norway as a net oil exporter for the period 1995Q1–2021Q3. The causal relationships between these macroeconomic variables are first examined using a conventional Granger causality test for the time domain and then the Breiutung–Candelon test based on the vector autoregression model for the frequency domain, which are estimated separately for the long-term, business cycle, and short-term components obtained by applying the boosted Hodrick–Prescott filter. This study demonstrates that the predictability of fuel prices for macroeconomic aggregates differs across various frequencies. Although the patterns of causality differ across countries depending on whether it is oil-importing or oil-exporting and the level of economic development and energy mix, this relationship is found to be important for slowly and fast fluctuating components but to different degrees in each country.
First published online 15 April 2025
Keyword : boosted HP filter, frequency domain, causality patterns, economic activity, fuel prices
How to Cite
Geise, A., & Piłatowska, M. (2025). Fuel prices and economic activity: time and frequency analysis for selected European countries. Technological and Economic Development of Economy, 1-29. https://doi.org/10.3846/tede.2025.23122
This work is licensed under a Creative Commons Attribution 4.0 International License.
References
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Cologni, A., & Manera, M. (2009). The asymmetric effects of oil shocks on output growth: A Markov–switching analysis for the G-7 countries. Economic Modelling, 26(1), 1–29. https://doi.org/10.1016/j.econmod.2008.05.006
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Hosoya, Y. (2001). Elimination of third-series effect and defining partial measures of causality. Journal of Time Series Analysis, 22(5), 537–554. https://doi.org/10.1111/1467-9892.00240
Huang, B.-N., Hwang, M. J., & Peng, H.-P. (2005). The asymmetry of the impact of oil price shocks on economic activities: An application of the multivariate threshold model. Energy Economics, 27(3), 455–476. https://doi.org/10.1016/j.eneco.2005.03.001
Huang, Y., & Guo, F. (2007). The role of oil price shocks on China’s real exchange rate. China Economic Review, 18(4), 403–416. https://doi.org/10.1016/j.chieco.2006.02.003
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