The Response of Consumer Spending to Changes in Gasoline Prices

Michael Gelman; Yuriy Gorodnichenko; Shachar Kariv; Dmitri Koustas; Matthew D. Shapiro; Dan Silverman; Steven Tadelis

doi:10.1257/mac.20210024

The Response of Consumer Spending to Changes in Gasoline Prices

Michael Gelman, Yuriy Gorodnichenko, Shachar Kariv, Dmitri Koustas, Matthew D. Shapiro, Dan Silverman, Steven Tadelis

Economics

Research output: Contribution to journal › Article › peer-review

4 Scopus citations

Abstract

This paper estimates how overall consumer spending responds to changes in gasoline prices. It uses the differential impact across consumers of the sharp drop in gasoline prices in 2014 for identification. This estimation strategy is implemented using comprehensive, high-frequency, transaction-level data for a large panel of individuals. The average estimated marginal propensity to consume (MPC) out of unanticipated, permanent shocks to income is approximately one. This estimate accounts for the elasticity of demand for gasoline and potential slow adjustment to changes in prices. The high MPC implies that changes in gasoline prices have large aggregate effects.

Original language	English (US)
Pages (from-to)	129-160
Number of pages	32
Journal	American Economic Journal: Macroeconomics
Volume	15
Issue number	2
DOIs	https://doi.org/10.1257/mac.20210024
State	Published - 2023

ASJC Scopus subject areas

Economics, Econometrics and Finance(all)

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10.1257/mac.20210024

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AU - Shapiro, Matthew D.

AU - Silverman, Dan

AU - Tadelis, Steven

PY - 2023

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The Response of Consumer Spending to Changes in Gasoline Prices

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