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Asymmetric responses of consumer spending to energy prices: A threshold VAR approach

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  • Knotek, Edward S.
  • Zaman, Saeed

Abstract

We document asymmetric responses of consumer spending to energy price shocks: using a threshold vector autoregressive model estimated with Bayesian methods on U.S. data with high and low real energy inflation regimes, positive energy price shocks have a greater negative effect on consumption compared with the increase in consumption that arises from negative energy price shocks. For large shocks, the cumulative consumption responses are three to five times greater for positive than negative shocks. In disaggregated spending data, the asymmetric responses are strongest for durable goods consumption, but asymmetries are also present in the responses of nondurables and services consumption.

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  • Knotek, Edward S. & Zaman, Saeed, 2021. "Asymmetric responses of consumer spending to energy prices: A threshold VAR approach," Energy Economics, Elsevier, vol. 95(C).
  • Handle: RePEc:eee:eneeco:v:95:y:2021:i:c:s0140988321000323
    DOI: 10.1016/j.eneco.2021.105127
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    More about this item

    Keywords

    Consumption; Energy prices; Asymmetry; Multivariate threshold models; Nonlinear structural impulse response;
    All these keywords.

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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