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US Inflation and Crude Oil Prices. An International Perspective

  • Wolfgang Pollan

    (WIFO)

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    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.

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    File URL: http://www.wifo.ac.at/wwa/pubid/46820
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    Paper provided by WIFO in its series WIFO Working Papers with number 451.

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    Length: 28 pages
    Date of creation: 03 Jun 2013
    Date of revision:
    Handle: RePEc:wfo:wpaper:y:2013:i:451
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