Relationship between Oil Prices and Inflation

Economists in the past 20 years have examined the relationship between oil prices and inflation. The common finding has been one of “limited” or “modest” correlation between these two variables. Michele Cavallo wrote on this topic in the FRBSF Economic Letter and made the observation that in the “1970s and early 1980s, rising oil prices were accompanied by double-digit overall inflation in the U.S. and in several other developed economies.” There were studies conducted using data from 1960-2000 and the results were ambiguous as they showed a strong relationship between oil prices and inflation only before 1981. But since 2000 Continue reading Relationship between Oil Prices and Inflation

Venezuela’s Crisis

Since 2005 Latin American countries have seen an increase in economic growth, but now there seems to be a stall in poverty reduction. One country that is experiencing disastrous poverty and inflation rates is Venezuela. The country has been devastated from inflation rates at 140% and a poverty rate that jumped up to 32.1% in 2013. On top of economic distress, the extremely low price of petrol oil has been hurting Venezuela and it is now becoming apparent. Due to this economic decline the Venezuelan President, Nicolas Maduro, has increased the price of exported petrol oil from $0.01 to $0.60 Continue reading Venezuela’s Crisis