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Time Variation in the Inflation Passthrough of Energy Prices

Listed author(s):
  • TODD E. CLARK
  • STEPHEN J. TERRY

From Bayesian estimates of a vector autoregression that 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 that became less responsive to energy inflation starting around 1985. Copyright (c) 2010 The Ohio State University.

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File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1538-4616.2010.00347.x
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Article provided by Blackwell Publishing in its journal Journal of Money, Credit and Banking.

Volume (Year): 42 (2010)
Issue (Month): 7 (October)
Pages: 1419-1433

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Handle: RePEc:mcb:jmoncb:v:42:y:2010:i:7:p:1419-1433
Contact details of provider: Web page: http://www.blackwellpublishing.com/journal.asp?ref=0022-2879

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