Inflation expectations and the price at the pump

Carola Binder

Journal of Macroeconomics, 2018, vol. 58, issue C, 1-18

Abstract: Consumer inflation expectations are positively correlated with gas prices. The optimal monetary policy response to energy price fluctuations depends on whether inflation expectations are excessively sensitive to gas prices, perhaps due to their high volatility and salience. I use multi-horizon microdata to study the dynamics of consumers’ gas price and inflation expectations. Consumers do not “overweight” gas prices in their perception of inflation, relative to the expenditure share of gas. They believe gas price inflation is negatively autocorrelated and feeds into core inflation moderately. The impact of gas prices on inflation expectations fades quickly with forecast horizon.

Keywords: Gas prices; Energy prices; Inflation expectations; Consumers; Monetary policy (search for similar items in EconPapers)
JEL-codes: D84 E31 E52 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (52)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0164070418302076
Full text for ScienceDirect subscribers only

Related works:
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:jmacro:v:58:y:2018:i:c:p:1-18

DOI: 10.1016/j.jmacro.2018.08.006

Access Statistics for this article

Journal of Macroeconomics is currently edited by Douglas McMillin and Theodore Palivos

More articles in Journal of Macroeconomics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().