Do Energy-Price Shocks Affect Core-Price Measures?

26 Pages Posted: 13 Nov 2007

See all articles by Owen Humpage

Owen Humpage

Federal Reserve Bank of Cleveland

Eduard A. Pelz

Federal Reserve Bank of Chicago

Date Written: November 2002

Abstract

This paper investigates the relationship between energy-price shocks and three core measures of inflation in a vector autoregression model that incorporates measures of monetary policy and inflation expectations. The sample set includes data at monthly frequencies from 1980 through 2000. We find that that positive energy-price shocks have significant, though small, effects on all core price measures after a lag of 12 to 18 months, but that negative shocks have no discernable impact. The results suggest that relative energy-price changes do not distort the inflation signals that standard core-price measures provide.

Keywords: energy prices, vector autoregression, inflation, monetary policy

JEL Classification: Q43, E52

Suggested Citation

Humpage, Owen and Pelz, Eduard A., Do Energy-Price Shocks Affect Core-Price Measures? (November 2002). FRB of Cleveland Working Paper No. 02-15, Available at SSRN: https://ssrn.com/abstract=1029612 or http://dx.doi.org/10.2139/ssrn.1029612

Owen Humpage (Contact Author)

Federal Reserve Bank of Cleveland ( email )

PO Box 6387
Cleveland, OH 44101-1387
United States

Eduard A. Pelz

Federal Reserve Bank of Chicago ( email )

230 South LaSalle Street
Chicago, IL 60604
United States

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