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The Impact of Brent Oil Price Fluctuations on Iranian Inflation with Emphasis on Government Expenditure: Quantile and Wavelet Approaches
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Maryam Amini   , Mansour Haidari , Bahram Adrangi , Hossain Asgharpour , Saman Hatamerad * |
| Department of Economics, Faculty of Humanities, University of Zanjan , samanhatamerad@yahoo.com |
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Abstract: (8 Views) |
This study investigates the nonlinear and asymmetric dynamics between Brent crude oil price volatility and inflation in Iran over the quarterly period from 2004Q3 to 2024Q4. It incorporates the global uncertainty index as a proxy for risk and real government expenditure as a fiscal policy indicator. The analysis employs the Quantile-on-Quantile (QQ) approach and cross-quantilogram to examine relationships across different distribution levels, alongside wavelet coherence (Morlet wavelet) to capture time-frequency interactions. The findings indicate that the impact of oil price volatility on inflation strongly depends on inflation levels and government spending. At higher quantiles, the effect is positive, strong, and statistically significant, whereas at lower levels it is weak or even negative. A strong positive correlation is observed in upper quantiles of both oil volatility and inflation. Wavelet results highlight two periods of persistent co-movement (2010–2012 and 2015–2020), suggesting gradual transmission of oil shocks into inflation. These results emphasize the need for preventive policies, such as establishing stabilization funds, to mitigate the adverse effects of oil shocks and enhance economic resilience.
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| Keywords: Oil, Inflation, Government Expenditure, Wavelet coherence |
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Full-Text [PDF 1122 kb]
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Type of Study: Research |
Subject:
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