The Response of Consumer Spending to Changes in Gasoline Prices

Michael Gelman, Yuriy Gorodnichenko, Shachar Kariv, Dmitri Koustas, Matthew Shapiro, Dan Silverman and Steven Tadelis

No 22969, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper estimates how overall consumer spending responds to changes in gasoline prices. It uses the differential impact across consumers of the sudden, large drop in gasoline prices in 2014 for identification. This estimation strategy is implemented using comprehensive, high-frequency transaction-level data for a large panel of individuals. The estimated marginal propensity to consume (MPC) out of unanticipated, permanent shocks to income is approximately one. This estimate takes into account the elasticity of demand for gasoline and potential slow adjustment to changes in prices. The high MPC implies that changes in gasoline prices have large aggregate effects.

JEL-codes: E21 Q41 Q43 (search for similar items in EconPapers)
Date: 2016-12
New Economics Papers: this item is included in nep-ene, nep-mac, nep-mkt and nep-tre
Note: EEE EFG ME PR
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (24)

Published as Michael Gelman & Yuriy Gorodnichenko & Shachar Kariv & Dmitri Koustas & Matthew D. Shapiro & Dan Silverman & Steven Tadelis, 2023. "The Response of Consumer Spending to Changes in Gasoline Prices," American Economic Journal: Macroeconomics, vol 15(2), pages 129-160.

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Journal Article: The Response of Consumer Spending to Changes in Gasoline Prices (2023)
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