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How Do Oil Price Shocks Affect Consumer Prices?

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

MPRA Paper from University Library of Munich, Germany

Abstract: This paper evaluates the degree of pass-through from oil price shocks to disaggregate U.S. consumer prices. We find significantly positive effects of the oil price shock only on energy-intensive CPIs, which imply that significantly positive, though quantitatively small, response of 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 influences on prices of those goods, which is consistent with our empirical findings.

Keywords: Oil Price Shocks; Pass-Through; Disaggregated Consumer Price Indices; Vector Autoregression (search for similar items in EconPapers)
JEL-codes: E21 E31 Q43 (search for similar items in EconPapers)
Date: 2014-07-11
New Economics Papers: this item is included in nep-ene and nep-mac
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