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How Much Will the Rise in Commodity Prices Reduce Discretionary Income?

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Abstract

Commodity prices have risen considerably since August 2010, raising concerns that higher commodity prices could reduce households’ discretionary income and slow the recovery. For example, as former Federal Reserve Board Vice Chairman Donald Kohn said in the Wall Street Journal last fall: “… the surge in international commodity prices. If that persists it could hurt Americans’ disposable income, especially as it is reflected in higher gas and energy prices.” Is that concern warranted?

Suggested Citation

  • Jonathan McCarthy, 2011. "How Much Will the Rise in Commodity Prices Reduce Discretionary Income?," Liberty Street Economics 20110323, Federal Reserve Bank of New York.
    • Handle: RePEc:fip:fednls:86738
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    More about this item

    Keywords

    discretionary income; Commodity prices; personal consumption expenditures (PCE);
    All these keywords.

    JEL classification:

    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment

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