How Inflationary are Oil Price Shocks? A Regional Analysis

The impact of oil shocks is analyzed by estimating an augmented Phillips curve on a national, regional and city level in the United States. A significant pass-through to inflation (including all items) is recorded for all regions, while core inflation remains largely muted. The West region has experienced a much lower pass-through than other regions and a few reasons for this are; greater oil efficiency, lower inflation variability and a lower exchange rate pass-through in the West. Also noted is an increasing trend for pass-through to inflation since the late 1980’s, and the contrary was found for core inflation.