Richmond Fed Economist Yash P. Mehra and Research
Associate Jon D. Petersen present evidence of a
nonlinear relation between oil price changes and
consumer spending. They assert that oil price increases
have a negative effect on spending whereas oil price
declines have no effect: The estimated negative effect
of an oil price increase on spending is larger if one
focuses on oil price increases occurring after a period
of stable oil prices (net oil price increases) or if
spending includes durables, the latter suggesting the
possible negative influence of energy prices on the
purchase of big-ticket consumption goods. Furthermore,
the estimated oil price coefficients in the consumption
equation do not show parameter instability during the
1980s when oil prices moved widely for the first time in
both directions. pdf
