Gasoline price pass-through into CPI inflation: Evidence from Structure VAR

Weiyang Zhai

MPRA Paper from University Library of Munich, Germany

Abstract: We apply a Bayesian structural vector autoregression (VAR) model to estimate the impact of oil and exchange rate shocks on Japan’s gasoline prices and, furthermore, Japan’s gasoline price pass-through into CPI inflation. In addition to the traditional zero and sign restrictions, we adopt a Bayesian framework, which provides a broader set of credible regions. After evaluating the influence of oil supply shocks, economic activity shocks, oil-specific demand shocks, and exchange rate shocks, we found evidence that an increase in gasoline prices is associated with a positive economic activity shock and oil-specific demand shock. On the other hand, the impact of any of the above shocks was not observed on the Japanese consumer price index from the estimated results.

Keywords: Consumer price index; Structural VAR; Pass-through; Oil prices; Gasoline prices (search for similar items in EconPapers)
JEL-codes: E31 F31 Q41 Q43 (search for similar items in EconPapers)
Date: 2025-03-26, Revised 2025-04-01
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:124208

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