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Time Variation in the Inflation Passthrough of Energy Prices
Author(s) -
CLARK TODD E.,
TERRY STEPHEN J.
Publication year - 2010
Publication title -
journal of money, credit and banking
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.763
H-Index - 108
eISSN - 1538-4616
pISSN - 0022-2879
DOI - 10.1111/j.1538-4616.2010.00347.x
Subject(s) - bayesian vector autoregression , economics , volatility (finance) , vector autoregression , inflation (cosmology) , core inflation , econometrics , monetary economics , monetary policy , bayesian probability , stochastic volatility , inflation targeting , statistics , mathematics , physics , theoretical physics
From Bayesian estimates of a vector autoregression that allows for both coefficient drift and stochastic volatility, we obtain the following three results. First, beginning in approximately 1975, the responsiveness of core inflation to changes in energy prices in the United States fell rapidly and remains muted. Second, this decline in the passthrough of energy inflation to core prices has been sustained through a recent period of markedly higher volatility of shocks to energy inflation. Finally, reduced energy inflation passthrough has persisted in the face of monetary policy that became less responsive to energy inflation starting around 1985.