The Response of Consumer Spending to Changes in Gasoline Prices

This paper estimates how overall consumer spending responds to changes in gasoline prices. It uses the differential impact across consumers of sharp drop prices 2014 for identification. estimation strategy is implemented using comprehensive, high-frequency, transaction-level data a large panel individuals. The average estimated marginal propensity consume (MPC) out unanticipated, permanent shocks income approximately one. estimate accounts elasticity demand and potential slow adjustment high MPC implies that have aggregate effects. (JEL D12, G51, L11, L71, L81, Q35)