Empirical Evidence on the Impact of Crude Oil Prices on Domestic Inflation: The Case of Ecuador, 1950-1995

In this study, heteroskedasticity-corrected two stage least squares estimation is used to identify determinants of the inflation rate in Ecuador over the 1950-1995 period. During this time frame, Ecuador made the transition from an oil-importing nation to a net oil-exporting nation. Accordingly, there is a focus on the inflation impact of crude oil prices. The evidence suggests that the money supply, the exchange rate, expected inflation, and crude oil prices all positively impacted on inflation during the study period.