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How do oil price shocks affect consumer prices?

Liping Gao (), Hyeongwoo Kim () and Richard Saba

Energy Economics, 2014, vol. 45, issue C, 313-323

Abstract: This paper evaluates the degree of pass-through from oil price shocks to disaggregate U.S. consumer prices. We find significantly positive effects of the oil price shock only on energy-intensive CPIs, which imply that significantly positive, though quantitatively small, response of the total CPI is mainly driven by substantial increases in prices of energy-related commodities. Unexpected changes in the oil price may result in decreases in the budget for non-energy commodities, if the demand for energy is inelastic (Edelstein and Kilian, 2009). Decreases in the demand for non-energy commodities will then result in limited influences on prices of those goods, which is consistent with our empirical findings.

Keywords: Oil price shocks; Pass-through; Disaggregated consumer price indices; Vector autoregression (search for similar items in EconPapers)
JEL-codes: E21 E31 Q43 (search for similar items in EconPapers)
Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:45:y:2014:i:c:p:313-323

DOI: 10.1016/j.eneco.2014.08.001

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