Gasoline price pass-through into CPI inflation: Evidence from Structure VAR

Zhai, Weiyang (2025): Gasoline price pass-through into CPI inflation: Evidence from Structure VAR.

Abstract

We apply a Bayesian structural vector autoregression (VAR) model to estimate the impact of oil and exchange rate shocks on Japan’s gasoline prices and, furthermore, Japan’s gasoline price pass-through into CPI inflation. In addition to the traditional zero and sign restrictions, we adopt a Bayesian framework, which provides a broader set of credible regions. After evaluating the influence of oil supply shocks, economic activity shocks, oil-specific demand shocks, and exchange rate shocks, we found evidence that an increase in gasoline prices is associated with a positive economic activity shock and oil-specific demand shock. On the other hand, the impact of any of the above shocks was not observed on the Japanese consumer price index from the estimated results.

• Item Type: MPRA Paper
• Language: English
• Keywords: Consumer price index; Structural VAR; Pass-through; Oil prices; Gasoline prices
• Subjects: E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E31 - Price Level ; Inflation ; Deflation; F - International Economics > F3 - International Finance > F31 - Foreign Exchange; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q4 - Energy > Q41 - Demand and Supply ; Prices; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q4 - Energy > Q43 - Energy and the Macroeconomy

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