Asymmetric responses of consumer spending to energy prices: a threshold VAR approach

Edward S. Knotek II, Saeed Zaman

Research output: Contribution to journalArticlepeer-review

Abstract

We document asymmetric responses of consumer spending to energy price shocks: using a threshold vector autoregressive model estimated with Bayesian methods on U.S. data with high and low real energy inflation regimes, positive energy price shocks have a greater negative effect on consumption compared with the increase in consumption that arises from negative energy price shocks. For large shocks, the cumulative consumption responses are three to five times greater for positive than negative shocks. In disaggregated spending data, the asymmetric responses are strongest for durable goods consumption, but asymmetries are also present in the responses of nondurables and services consumption.

Original languageEnglish
Article number105127
Number of pages13
JournalEnergy Economics
Volume95
Early online date23 Jan 2021
DOIs
Publication statusPublished - 31 Mar 2021

Keywords

  • consumption
  • energy prices
  • asymmetry
  • multivariate threshold models
  • nonlinear structural impulse response

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