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

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. (c) 2021 Elsevier B.V. All rights reserved.

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Research shows asymmetric responses of consumer spending to energy price shocks in U.S. data, with a greater negative effect on consumption from positive energy price shocks compared to the increase from negative shocks, especially for larger shocks. Durable goods consumption exhibits the strongest asymmetric response, but asymmetries are also present in nondurables and services consumption.