This study examines the nonlinear and quantile-dependent macroeconomic effects of crude oil price fluctuations in India using the quantile-on-quantile regression (QQR) framework. The analysis covers four key macroeconomic indicators: private final consumption expenditure (PFCE), gross fixed capital formation (GFCF), real gross domestic product (RGDP) and the consumer price index (CPI), capturing consumption, investment, income and inflation dynamics. Unlike conventional linear or standard QR models, the QQR framework simultaneously captures heterogeneity across both oil price regimes and macroeconomic states, enabling a two-dimensional assessment of nonlinear and asymmetric transmission effects. The results confirm pronounced heterogeneity and state-dependent transmission of oil shocks. Consumption and income responses are strongest in low and moderate oil price regimes but weaken at higher quantiles, reflecting demand adjustment and policy offsets. Investment shows sharper nonlinearity, contracting significantly during high oil price regimes. Inflation responses are asymmetric: declines yield limited disinflation, while increases exert strong inflationary pressure in upper CPI quantiles. Overall, the findings underscore the importance of accounting for distributional heterogeneity and suggest that policy responses should be conditioned on prevailing oil price and macroeconomic regimes rather than average historical effects.
Purushottam Yadav (Tue,) studied this question.