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Gasoline price changes and consumer inflation expectations: Experimental evidence

Felix Aidala, Olivier Armantier, Gizem Kosar, Jason Somerville, Giorgio Topa and Wilbert van der Klaauw

Journal of Economic Behavior & Organization, 2024, vol. 220, issue C, 66-80

Abstract: Using an experimental approach, we show that inflation expectations respond to gasoline price fluctuations. The effect, however, is small compared to other goods (food, durable goods) and not disproportionately large relative to the expenditure share of gasoline in households' basket. The effect also weakens with the forecast horizons and displays substantial asymmetry: inflation expectations respond significantly more to positive than negative gasoline price shocks. A counterfactual exercise suggests that while the sharp rise in gasoline prices that followed the Russian invasion of Ukraine contributed substantially to short-term inflation expectations dynamics, the subsequent decline in gasoline prices did not.

Keywords: Survey experiment; Inflation expectations; Gasoline prices; Household survey (search for similar items in EconPapers)
JEL-codes: C93 D84 E31 E37 E52 Q43 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:220:y:2024:i:c:p:66-80

DOI: 10.1016/j.jebo.2024.01.027

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Journal of Economic Behavior & Organization is currently edited by Houser, D. and Puzzello, D.

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