Modelling the asymmetric responses of price level to oil price changes in Qatar

Abstract

This paper inspects the asymmetric effect of oil price on prices level in Qatar. To achieve that, we proceed by employing a nonlinear autoregressive distributed lag (ARDL) approach on data during the period 1990Q1-2014Q4. The estimation results show evidences of an incomplete and asymmetric influence of oil price on price level in the long term. Moreover, we find that price responses to negative changes in oil price is greater than its response to positive changes. Given Qatar's economic features, a decrease in oil price could cause lower imports and production prices and consequently a substantial influence on domestic prices level. However, the lower effect of positive oil price changes on consumer prices can be explained by the subsidies system, the consumption patterns, and the exchange rate regime.