Is there a persistent inflation in OECD energy prices? Evidence from panel unit root tests

Abstract

The aim of this paper is to investigate whether inflation persists in energy prices of OECD countries. The method of choice for this purpose appears naturally to be panel unit root tests. Using three unit root tests we investigate the unit root hypothesis for an energy price on an unbalanced panel of all 34 OECD countries for the period from the first quarter of 1979 to the first quarter of 2012. The main findings of this paper indicate that; inflation is not uniformly persistent for all OECD countries. However individual inspections support the fact that Belgium, Czech Republic, Estonia, France, Germany, Italy, Korea, Poland, Slovak Republic, Turkey and United Kingdom exhibit a persistent inflation in energy commodities. On the other hand empirical evidence also strongly supports the fact that inflation in the aggregated energy commodities in Austria, Canada, Finland, Luxemburg, Norway, Sweden and United States display no persistency.