Oil price pass-through to consumer prices and the inflationary environment: a STAR approach

Atsushi Sekine

Applied Economics Letters, 2020, vol. 27, issue 6, 484-488

Abstract: Previous studies on the effects of oil price changes indicate that oil price pass-through to inflation has decreased in the United States since the Great Moderation. This paper investigates why oil price pass-through has decreased from the viewpoint of an inflationary environment. By estimating a smooth transition autoregressive model that considers past US inflation rates, I show that oil price pass-through is low in a low-inflation environment. This result suggests that the inflationary environment is important in explaining the declining oil price pass-through in the United States.

Date: 2020
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DOI: 10.1080/13504851.2019.1636931

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