Gasoline prices, transport costs, and the U.S. business cycles

Abstract

The e¤ects of gasoline prices on the U.S. business cycles are investigated. In order to distinguish between gasoline supply and gasoline demand shocks, the price of gasoline is endogenously determined through a transportation sector that uses gasoline as an input of production. The model is estimated for the U.S. economy using …ve macroeconomic time series, including data on transport costs and gasoline prices. The results show that although standard shocks in the literature (e.g., technology shocks, monetary policy shocks) have signi…cant e¤ects on the U.S. business cycles in the long run, gasoline supply and demand shocks play an important role in the short run.JEL Classi…cation: E32, E52, F41

What Explains Global Inflation

“…We present the details of our model in Appendix A. Motivated by earlier similar frameworks, such as by Blanchard and Gali (2007), Hou, Mountain, and Wu (2016) and Yilmazkuday (2014Yilmazkuday ( , 2021, our model consists of individuals consuming oil and non-oil products, firms producing oil-and non-oil-products, and a cenral bank which conducts monetary policy to target inflation. The model includes four shocks broadly similar to those in our empirical setup.…”

“…We have discussed in Section III the consistency of the key historical developments in oil markets and the behavior of oil price shocks we identified. Since our sample also includes 2022, we imposed an additional narrative restriction that the structural oil price 29 The predominant role of demand shocks and some offsetting role of supply shocks in driving inflation movements during the early stage of the pandemic were also reported by Bekaert, Engstrom, and Ermolov (2021) for the United States and O'Brien, Dumoncel, and Gonçalves (2021) for the euro area. The role of broad-based shocks-both demand-and supply-driven-in the sharp rise in inflation in 2021-22 was documented by Ball et al (2022) and Del Negro et al (2022) for the United States and Eickmeier and Hoffman (2022) for the United States and Euro Area.…”

“…The model dynamics are driven by bond accumulation. The model features are motivated by earlier studies such as by Blanchard and Gali (2007), Hou, Mountain, and Wu (2016), and Yilmazkuday (2014;, and more broadly for demand-and supply-driven sources of business cycles and inflation fluctuations, with Smets and Wouters (2007) and Del Negro et al (2013;2022). 2 A1.1 Households Following Gali and Monacelli (2005), the representative household has the following standard intertemporal lifetime utility function:…”