Examining the Impact of Oil Prices and Economic Policy Uncertainty on Inflation: A Novel Wavelet Quantile Transformation Approach

Articles in Press

Document Type : Research Paper

Authors

1 PhD Student in Economics, Urmia University

2 Department of Economics, Faculty of Economics and Management, Urmia University, Urmia, Iran.

3 Associate Professor (Senior Lecturer) in Finance at University of Exeter United Kingdom

4 Professor, Department of Economics, Faculty of Literature and Humanities, Ilam University

10.22034/ecoj.2025.66674.3419

Abstract

This study examines the effect of oil prices and economic policy uncertainty on inflation over the period 2008 to 2023 using the wavelet quantile transform approach. The main objective of this research is to analyze the complex dynamics between these variables over different time horizons and under different market conditions (such as bull and bear markets). The results show that oil prices have a significant effect on inflation, but this effect is different in the short, medium and long term. The effect of oil prices on inflation is greater in the short term and decreases over time. Economic policy uncertainty also has a significant effect on inflation, especially in conditions where the market is facing high policy volatility. This effect is especially observed in the upper quantiles (i.e. when inflation is at higher levels). Using the wavelet quantile transform has allowed researchers to analyze the relationships between variables more accurately over different time horizons and under different market conditions. This method shows that the impact of economic and policy shocks on inflation varies across quantiles. The results of this study help economic policymakers better understand the effects of key variables such as oil prices and economic policy uncertainty on inflation and adopt more effective strategies in the face of these challenges.

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Main Subjects

Applied Theories of Economics

Articles in Press, Accepted Manuscript
Available Online from 17 December 2025

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