Oil Prices and Consumer Spending: A Reprint from the "Economic Quarterly"
DIANE Publishing, 2008 - 20 pages
Empirical evidence suggests that oil price increases have a negative effect on spending whereas oil price declines have no effect. The estimated negative effect of an oil price increase on spending is larger if we focus on oil price increases that occur after a period of stable oil prices (net oil price increases), or if spending includes durables, the latter suggesting the possible negative influence of energy prices on the purchase of big-ticket consumption goods. Furthermore, the estimated oil price coefficients in the consumption equation do not show parameter instability during the 1980s, the period when oil prices moved widely for the first time in both directions. Charts and tables.
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affect consumer spending affect the macroeconomy aggregate consumer spending allocative channels asymmetric relation Bernanke break date changes in oil coefﬁcients that appear consumer oil price consumer spending equation economic determinants effect on spending empirical estimated coefﬁcient estimated negative effect exogenous oil price F statistic federal funds rate ﬁlter ﬁnd ﬁrms FRt−s gas and oil Hamilton increases in oil increases measured relative indicating that oil inﬂuence lagged values measures of oil monetary policy net oil price nominal interest rate nonlinear null hypothesis oil price changes oil price coefﬁcients oil price declines oil price effects oil price increases oil price index oil price movements oil price series oil price shocks oil price variable oil-exporting countries oilprice Panel parameter instability planned consumption Price Increases 1-year price increases lead price increases measured real GDP growth reduced-form relation between oil response to oil short-term consumption equation signiﬁcant effect Stability of Oil sumer t-values three-year peaks zero