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Journal Article

Are Oil Shocks Inflationary? Asymmetric and Nonlinear Specifications versus Changes in Regime

Mark A. Hooker
Journal of Money, Credit and Banking
Vol. 34, No. 2 (May, 2002), pp. 540-561
Stable URL: http://www.jstor.org/stable/3270701
Page Count: 22
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Are Oil Shocks Inflationary? Asymmetric and Nonlinear Specifications versus Changes in Regime
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Abstract

This paper identifies a structural break in core U.S. inflation Phillips curves such that oil prices contributed substantially before 1981, but since that time pass-through has been negligible. This characterization is robust to a variety of re-specifications and fits the data better than asymmetric and nonlinear oil price alternatives. Evidence does not support the hypotheses that declining energy intensity or deregulation of energy-producing and -consuming industries played an important role. Monetary policy did not itself become less accommodative of oil shocks, but may have helped create a regime where inflation is less sensitive to price shocks more generally.

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