Does uncertainty amplify the inflation pass-through of gasoline price shocks?

Daniel Gründler and Johann Scharler

Energy Economics, 2025, vol. 144, issue C

Abstract: We study how U.S. inflation uncertainty responds to gasoline price shocks and how strongly the endogenous response of uncertainty influences the inflationary effects of these shocks. Using a VAR with stochastic volatility, which allows for delayed endogenous responses of volatility to level shocks, we find that uncertainty associated with U.S. inflation rises in response to adverse gasoline price shocks. A counterfactual exercise shows that gasoline price shocks help explain inflation uncertainty, but the feedback from inflation uncertainty to inflation is quantitatively negligible.

Keywords: Gasoline prices; Inflation; Uncertainty; Vector autoregression; Stochastic volatility (search for similar items in EconPapers)
JEL-codes: C11 C32 D80 E31 Q41 Q43 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:144:y:2025:i:c:s0140988325001720

DOI: 10.1016/j.eneco.2025.108348

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