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US Inflation and Crude Oil Prices. An International Perspective

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  • Wolfgang Pollan

    (WIFO)

Abstract

This paper explores the question to what extent non-domestic factors provide an explanation of US inflation over the last three decades. Are lagged dependent variables – traditionally interpreted as proxies for inflation expectations – simply proxies for oil and commodity prices? The results of a Phillips curve covering the years from the first oil price shock to the year 2014 show that crude oil prices, which basically are world market prices, have exerted a strong influence on inflation, while inflation expectations have played a much feebler role in the inflation process since the "Volcker" disinflation. Over the years the effects of domestic factors, such as the unemployment rate, have weakened.

Suggested Citation

  • Wolfgang Pollan, 2013. "US Inflation and Crude Oil Prices. An International Perspective," WIFO Working Papers 451, WIFO.
  • Handle: RePEc:wfo:wpaper:y:2013:i:451
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    Keywords

    Commodity prices; expectations; inflation; monetary policy; Phillips Curve;

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