TY  - UNPD
A1  - Kilian, Lutz
A1  - Zhou, Xiaoqing
T1  - Oil prices, gasoline prices and inflation expectations: a new model and new facts
T2  - Center for Financial Studies (Frankfurt am Main): CFS working paper series ; No. 645
N2  - The conventional wisdom that inflation expectations respond to the level of the price of oil (or the price of gasoline) is based on testing the null hypothesis of a zero slope coefficient in a static single-equation regression model fit to aggregate data. Given that the regressor in this model is not stationary, the null distribution of the t-test statistic is nonstandard, invalidating the use of the normal approximation. Once the critical values are adjusted, these regressions provide no support for the conventional wisdom. Using a new structural vector regression model, however, we demonstrate that gasoline price shocks may indeed drive one-year household inflation expectations. The model shows that there have been several such episodes since 1990. In particular, the rise in household inflation expectations between 2009 and 2013 is almost entirely explained by a large increase in gasoline prices. However, on average, gasoline price shocks account for only 39% of the variation in household inflation expectations since 1981.
T3  - CFS working paper series - 645 
KW  - inflation
KW  - expectations
KW  - anchor
KW  - missing disinflation
KW  - oil price
KW  - gasoline price
KW  - household survey
Y1  - 2020
UR  - http://publikationen.ub.uni-frankfurt.de/frontdoor/index/index/docId/55825
UR  - https://nbn-resolving.org/urn:nbn:de:hebis:30:3-558254
UR  - https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3731014
IS  - This version: September 9, 2020
PB  - Center for Financial Studies
CY  - Frankfurt, M.
ER  -