Time variation in the inflation passthrough of energy prices
AbstractFrom Bayesian estimates of a vector autoregression (VAR) which allows for both coefficient drift and stochastic volatility, we obtain the following three results. First, beginning in approximately 1975, the responsiveness of core inflation to changes in energy prices in the United States fell rapidly and remains muted. Second, this decline in the passthrough of energy inflation to core prices has been sustained through a recent period of markedly higher volatility of shocks to energy inflation. Finally, reduced energy inflation passthrough has persisted in the face of monetary policy which quickly became less responsive to energy inflation starting around 1985.
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Bibliographic InfoPaper provided by Federal Reserve Bank of Kansas City in its series Research Working Paper with number RWP 09-06.
Date of creation: 2009
Date of revision:
Other versions of this item:
- Todd E. Clark & Stephen J. Terry, 2010. "Time Variation in the Inflation Passthrough of Energy Prices," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 42(7), pages 1419-1433, October.
- NEP-ALL-2009-03-22 (All new papers)
- NEP-CBA-2009-03-22 (Central Banking)
- NEP-ENE-2009-03-22 (Energy Economics)
- NEP-MAC-2009-03-22 (Macroeconomics)
- NEP-MON-2009-03-22 (Monetary Economics)
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