Oil-price pass-through to inflation in Scandinavia: A comparative analysis using a local projections approach

Sammanfattning

This thesis examines the pass-through from Brent oil-price changes to inflation in Sweden, Denmark, and Norway, and whether this relationship is moderated by exchange-rate movements against the US dollar. Using monthly data for 1997M1–2025M12, the thesis estimates country-specific local projections over a 24-month horizon. The dependent variable is year-over-year HICP inflation, while the main explanatory variable is monthly Brent oil-price growth. An extended specification includes an interaction between oil-price growth and exchange-rate changes to test whether currency depreciation amplifies pass-through. The results show that positive Brent oil-price changes are associated with higher inflation in all three countries. The responses are larger and more precisely estimated for Sweden and Denmark, while Norway shows a weaker and less precise response. Baseline effects generally build during the first year and decline at longer horizons. The exchange-rate interaction provides limited evidence of amplification. Some point estimates suggest stronger pass-through during depreciation episodes, but the effects are not statistically significant. Overall, the findings indicate heterogeneous oil-price pass-through across Scandinavian economies, while the moderating role of exchange rates remains uncertain. The results should be interpreted as reduced-form evidence on dynamic associations, rather than causal estimates of structurally identified oil-supply shocks to inflation.