Gas price shocks and euro area inflation

Jakob Adolfsen, Massimo Ferrari Minesso, Jente Esther Mork and Ine Van Robays

Journal of International Money and Finance, 2024, vol. 149, issue C

Abstract: This paper develops a Bayesian VAR model to identify three structural shocks driving the European gas market: demand, supply, and inventory shocks. We document how gas price fluctuations have a heterogeneous pass-through to euro area prices depending on the underlying shock driving them. The pass-through is stronger and more persistent when gas prices are driven by aggregate demand or supply pressures, while inventory shocks have a weaker impact. Supply shocks, moreover, are found to pass through to all components of euro area inflation—producer prices, wages, and core inflation—which has implications for monetary policy. Finally, we document how the response of gas prices to shocks is non-linear and is significantly magnified in periods when the economy operates at capacity and, therefore, unemployment is low.

Keywords: Gas price; Pass-through; Price; Euro area (search for similar items in EconPapers)
JEL-codes: C50 C54 E30 E31 Q43 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0261560624001700
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Gas price shocks and euro area inflation (2024)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:149:y:2024:i:c:s0261560624001700

DOI: 10.1016/j.jimonfin.2024.103183

Access Statistics for this article

Journal of International Money and Finance is currently edited by J. R. Lothian

More articles in Journal of International Money and Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().