World oil price impact on prices in Poland

The world oil price is an exogenous as well as key component and factor influencing domestic prices (especially transportation). The question is: how the oil price influences producer and consumer prices. We focus on a short- and long-term relationship between the domestic prices and oil price (expressed in Polish zloty). We use Vector Error Correction Models, with cost-based specification, i.e. including additionally wages and euro-zloty exchange rate. The degree of estimated long-term pass-through oil prices to producer and consumer prices is 0,15 and 0,05, respectively. Both producer and consumer prices have comparable size of short-term reaction to an oil price shock, but the producer price reaction is more prolonged