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How Does the Oil Price Shock Affect Consumers?

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

No auwp2014-10, Auburn Economics Working Paper Series from Department of Economics, Auburn University

Abstract: This paper evaluates the degree of the pass-through effect of the oil price shock using disaggregated CPIs in the US. We find a significantly positive effect of the oil price shock only on energy-intensive CPIs, which imply that the strong pass-through effect on 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 pass-through effects on prices of those goods, which is consistent with our empirical findings.

Keywords: Oil Price Shocks; Pass-Through Effect; Disaggregated Consumer Price Indices; Vector Autoregression (search for similar items in EconPapers)
JEL-codes: E21 E31 Q43 (search for similar items in EconPapers)
Date: 2014-05
New Economics Papers: this item is included in nep-mac
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Related works:
Working Paper: How Does the Oil Price Shock Affect Consumers? (2013) Downloads
Working Paper: How Does the Oil Price Shock Affect Consumers? (2013) Downloads
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