World Crude Oil price, Domestic Fuel Pump prices and Food price Dynamics
Evidence of Asymmetric Pass through Effect in Kenya
Macroeconomic stability is one of the key policy targets pursued by economic policy makers. One of the important indicators of macroeconomic stability is Inflation measured using the consumer price index. Largely, inflation in Kenya is attributed to soaring food prices or external shocks reflected in world crude oil price. This study therefore sought to understand the dynamic relationship between crude oil prices, domestic fuel pump prices and inflation. The study employed linear and nonlinear Autoregressive Distributed Lag Model (ARDL) to unearth these dynamics. The results reveals existence of asymmetric and symmetric response in pump fuel prices and consumer food prices respectively to world crude oil prices.