Does uncertainty amplify the inflation pass-through of gasoline price shocks?
Year: 2025
Type: article
Abstract: We study how U.S. inflation uncertainty responds to gasoline price shocks and how strongly the endogenous response of uncertainty influences the inflationary effects of these shocks. Using a VAR with stochastic volatility, which allows for delayed endogenous responses of volatility to level shocks, we find that uncertainty associated with U.S. inflation rises in response to adverse gasoline price shocks. A counterfactual exercise shows that gasoline price shocks help explain inflation uncertainty, but the feedback from inflation uncertainty to inflation is quantitatively negligible. • Adverse gasoline price shocks lead to higher inflation and inflation expectations. • Uncertainty associated with inflation increases as well. • The endogenous increase in uncertainty amplifies the inflation response only weakly.
Source: Energy Economics
Authors: Daniel Gründler, Johann Scharler
Institution: Universität Innsbruck
Language: English
Subfield: Economics and Econometrics
Domain: Social Sciences
Open Access status: hybrid
Estimated APC paid: $4,280
OpenAlex ID: W4408185756