 Fueling expectations: The causal impact of gas prices on Inflation ExpectationsYoon Joo Jo and Ben Klopack Journal of Monetary Economics, 2025, vol. 153, issue C Abstract: We investigate the effects of temporary state-level gas tax suspensions on inflation expectations. Using a difference-in-differences strategy, we show that households in states that lower the gas tax reduce their inflation expectations, but the impact of the policy depends on how much of the tax cut was passed through to prices. We provide new causal evidence of the link between gas prices and household inflation expectations and demonstrate that gas prices play a more significant role in shaping inflation expectations than previously suggested in the literature. We also show experimental evidence that informing households about the tax reduction leads them to adjust their inflation expectations downward. However, we do not find evidence that temporary gas tax suspensions had a stimulative effect on consumption. These findings underscore the potential for alternative policy levers to influence household beliefs and behavior. Keywords: Inflation expectations; Survey; Gas prices; Gas tax holiday (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:moneco:v:153:y:2025:i:c:s0304393225000686 DOI: 10.1016/j.jmoneco.2025.103797 Access Statistics for this article Journal of Monetary Economics is currently edited by R. G. King and C. I. Plosser More articles in Journal of Monetary Economics from Elsevier |
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