The effects of oil price shocks on expenditure category CPI |
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Authors: | Yasunori Yoshizaki Shigeyuki Haomori |
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Affiliation: | 1. Graduate School of Economics, Kobe University 2–1, Kobe 657–8501, Japanyasunori.yoshizaki@gmail.com;3. Faculty of Economics, Kobe University 2–1, Kobe 657–8501, Japan |
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Abstract: | In this study, we apply a two-block structural vector autoregressive (VAR) model proposed by Kilian and Park (2009) in order to investigate the dynamic effects of changes in oil price on the expenditure category consumer price index (CPI) in the United States and Japan. Our results confirm that each expenditure category price index responded very differently to the same structural shock, and that whether changes in oil price function as a positive stimulus or a negative shock for the individual expenditure category prices also depends on the kind of underlying shock that drives the changes in oil price. Finally, our results also reveal that the manner in which changes in oil price affect each expenditure category price differs between the United States and Japan and these detailed-level differences may lead to aggregate-level differences in the price response of both countries to changes in oil price. |
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Keywords: | consumer price index oil price shock expenditure category structural vector autoregressive model |
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