What Matters for Consumer Sentiment? World Oil Price or Retail Gasoline Price?
21 Pages Posted: 22 Jun 2020
Date Written: May 27, 2020
This paper examines the impact of oil supply and demand shocks on gasoline prices and consumer sentiment in the Euro Area. Results reveal that aggregate consumer sentiment and its components deteriorate notably as a response to positive shocks to real gasoline prices. On the contrary, positive oil-specific demand shocks do not trigger a deterioration of consumer sentiment. In other words, consumer sentiment is affected primarily by unexpected changes in gasoline prices at the pump rather than unexpected changes in crude oil prices. The analysis is further refined to analyze the effects of these shocks to six sub-components of consumer sentiment.
Keywords: oil supply and demand shocks; gasoline prices; consumer sentiment; euro area
JEL Classification: G10; G11; G12; G14
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