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Do gasoline prices asymmetrically affect US consumers’ economic outlook?

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  • Baghestani, Hamid

Abstract

Changes in gasoline prices can affect consumer sentiment which may then influence consumption. We utilize the Michigan Surveys of Consumers data on the Index of Current Economic Conditions (ICC) and the Index of Consumer Expectations (ICE) in order to explore the dynamic relationship between US consumers’ economic outlook (ICE) and real gasoline prices (Pg) for 1993–2015. We find that ICE and ICC as well as ICE and Pg are cointegrated: ICE is positively related to ICC and negatively related to Pg in the long-run. In the short-run, ICE responds symmetrically to ICC movements but asymmetrically to Pg movements. That is, ICE remains unchanged when Pg declines but deteriorates when Pg rises.

Suggested Citation

  • Baghestani, Hamid, 2016. "Do gasoline prices asymmetrically affect US consumers’ economic outlook?," Energy Economics, Elsevier, vol. 55(C), pages 247-252.
    • Handle: RePEc:eee:eneeco:v:55:y:2016:i:c:p:247-252
    DOI: 10.1016/j.eneco.2016.02.012
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    Cited by:

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    3. Baghestani, Hamid, 2019. "An analysis of vehicle-buying attitudes of US consumers," Research in Transportation Economics, Elsevier, vol. 75(C), pages 62-68.
    4. de Mendonça, Helder Ferreira & Garcia, Pedro Mendes, 2023. "Effects of oil shocks and central bank credibility on price diffusion," International Review of Economics & Finance, Elsevier, vol. 84(C), pages 304-317.
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    More about this item

    Keywords

    Energy prices; Consumer sentiment; Asymmetry; Negativity bias;
    All these keywords.

    JEL classification:

    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy
    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment

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