Oil Price Pass-Through into Consumer Prices: Evidence from U.S. Weekly Data
30 Pages Posted: 31 Aug 2019 Last revised: 26 Aug 2021
Date Written: August 15, 2021
Using U.S. data from Monday of each week, this paper estimates oil price pass-through into consumer prices (PC) and oil price pass-through into gasoline retail prices (PG) in a continuous way. The results show that PC (PG) is about 0.5% (13%) after a week, 1.5% (37%) after three months, and 4.2% (50%) in the long run. The estimated PC is further decomposed into direct PC (representing oil price effects on consumer prices through gasoline retail prices) versus indirect PC (representing oil price effects on consumer prices through ex-gasoline prices), suggesting that long-run oil price effects on consumer prices are mostly through ex-gasoline consumer prices. Despite having distinct pass-through estimates, about three-fourths of weekly volatility in both gasoline retail and consumer prices are explained by oil price shocks in the long run.
Keywords: Pass-Through, Oil Prices, Gasoline Prices, Consumer Prices, Weekly Data
JEL Classification: E31, Q43
Suggested Citation: Suggested Citation