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Why Don't Oil Shocks Cause Inflation? Evidence from Disaggregate Inflation Data.
- Source :
- Journal of Money, Credit & Banking (John Wiley & Sons, Inc.); Sep2011, Vol. 43 Issue 6, p1165-1183, 19p, 4 Charts, 1 Graph
- Publication Year :
- 2011
-
Abstract
- This paper uses disaggregate U.S. inflation data to evaluate explanations for the breakdown of the relationship between oil price shocks and consumer price inflation. A data set with measures of inflation, energy intensity, labor intensity, and sensitivity to monetary policy is constructed for 97 sectors that make up core CPI inflation. A comparison of the 1973-85 and 1986-2006 time periods reveals that substitution away from energy use in production and monetary policy were both important, with approximately two-thirds of the change in response of inflation to oil shocks being due to reduced energy usage, and one-third to monetary policy. We find no evidence that other factors, such as changes in wage rigidities or changes in the persistence of oil shocks, played a role. [ABSTRACT FROM AUTHOR]
Details
- Language :
- English
- ISSN :
- 00222879
- Volume :
- 43
- Issue :
- 6
- Database :
- Complementary Index
- Journal :
- Journal of Money, Credit & Banking (John Wiley & Sons, Inc.)
- Publication Type :
- Academic Journal
- Accession number :
- 64904749
- Full Text :
- https://doi.org/10.1111/j.1538-4616.2011.00421.x