View Conference Presentation - United States Association for

Report
The submitted manuscript has been created by Argonne National Laboratory, a U.S. Department of
Energy laboratory managed by UChicago Argonne, LLC, under Contract No. DE-AC02-06CH11357.
The U.S. Government retains for itself, and others acting on its behalf, a paid-up, nonexclusive,
irrevocable worldwide license in said article to reproduce, prepare derivative works, distribute
copies to the public, and perform publicly and display publicly, by or on behalf of the Government
Gasoline Prices, Vehicle Spending and National Employment:
Vector Error Correction Estimates Implying a Structurally
Adapting, Integrated System, 1949-2011
By: D. J. Santini and D. A. Poyer*
Presented at:
32nd U.S. and International Associations for Energy Economics
North American Conference
Anchorage, Alaska: July 28-31, 2013
Sponsor: J. Ward, DOE Vehicle Technologies Program
* Argonne Consultant and Morehouse College Professor
Research Problem
 Assess the dynamic relationship between real gasoline prices
and macroeconomic activity
 Assess the direct effect of real gasoline prices on real motor
vehicle expenditures and employment
 Assess real motor vehicle expenditures on employment
 Assess structural changes in the dynamic relationship in real
gasoline prices, real motor vehicle expenditures, and total
employment over the post World War II period (between
1949q2 to 1987q4 and 1988q1 to 2011q3)
Method(s)




Vector Error Correction econometric model, 1949-2012
Sub-vs. full-period tests for cointegration, structural change
Consideration of both directions in bi-directional dynamic VECM
Theoretical interpretation in context of selected literature
2
Data Used and Transformations Made for Model
Variables
Unit of
Mnemonic
Definition
Source
Measurea
LNS12000000Q
RMVE=
Seasonally Adjusted
Bureau of Labor
Employment Level
Statistics
Real motor vehicle & parts
Bureau of Economic
(DMOTRC1/DMOTRG3)100 expenditures
realgasprice=
(DGOERG3/DPCERG3)
Analysis
Real price of gasoline & other
Bureau of Economic
energy goodsb
Analysis
Thousands
Billions 2005 $
Index
(2005=1)
a Values
are quarterly.
b Ratio of the price indices for real gasoline and other goods, and personal consumption
expenditures.
4
Real Gasoline Price First Difference Changes Have
Increased in Volatility Throughout the Full Sample
Period, but Appear Stationary [I(0)]
8
Employment First Differences Appear Stationary
[I(0)]. Variation Dropped Sharply During the
“Great Moderation” – Which Ended Badly.
<< Great Moderation >>
9
Real Motor Vehicle Expenditure First Difference
Changes Were Least in the Great Moderation &
Appear Stationary [I(0)] for the Full Period
10
The Levels of Real Gasoline Prices Were Dropping
and Low at 1st-3rd Longest Times Between Recessions
Great Moderation
2nd
1st Longest
Longest
3rd
Longest
11
Within Year Timing of Reactions to Real Gas Price
Impulses is Critical to Interpretation. RMVE Effects
are Immediate
Impulse Response Function, Full Equation
15
Real Gasoline Price Impulse (Increase) Causes an
Employment Decline With a Delay of Nearly a Year
Impulse Response Function, Full Equation
16
Employment Response to a Motor Vehicle Spending
Impulse is Fairly Prompt, Mostly in < 1 Year
Impulse Response Function, Full Equation
17
If Employment Had Dropped Immediately After a
Gasoline Price Impulse, It Could Have Been the Cause of
“in-Year” Motor Vehicle Spending Decline (But it Didn’t)
Impulse Response Function, Full Equation
18
More Jobs Apparently Lead to More Spending on
Vehicles and Fuel, Pushing Fuel Demand & Price Up
Impulse Response Function, Full Equation
19
So Far, Signs of Qrtrly “IRFs” Were the Same in Both
Periods, Though Sizes Differed. However, for Real
Motor Vehicle Spending on Gasoline Price, Signs Change
Impulse Response Function, Full Equation
20
The 1949-87 Period Ends With 2 Decades of Sharp
Reduction in Fuel Use Per Vehicle. Reduced Demand
for Gasoline Should Lower Gasoline Price (and Did).
Comparison of new vehicle on-road fuel use to fleet fuel use (per vehicle), 1975-2011
21
Conclusions









Real gasoline price, motor vehicle spending and employment are cointegrated
identically for the full sample
Error correction coefficients & adjustment parameters are collectively significantly
different across subperiods
The specific sectoral shifts hypothesis advocated by J. Hamilton, which focuses on
motor vehicles as the key oil price shock transmission path, is supported
Kilian’s arguments that gasoline may be as/more important than oil, and that
gasoline prices are endogenous, is supported
Patterns of predicted impulse response of motor vehicle spending to a gasoline
price shock are consistent with Ramey and Vine’s 2010 estimate.
Kilian’s argument that it is important to be able to produce small cars domestically
to mitigate gasoline price shock impacts is supported. CAFE is credited.
Motor vehicle spending remains as important in 1988-2012 as in 1949-2011.
1973-87 fleet efficiency gains, via CAFE regulation, endogenously pushed gasoline
prices down, enabling a shift to profitable large domestic vehicles, contributing to
the Great Moderation. Current high real gasoline prices, which restrict the
recovery, probably result from inadequate gains in fleet fuel efficiency to date.
Dramatic variations in the domestic output of motor vehicles are a fundamental
cause of Post WWII isolated recessions, the double dip recessions and Great
Recession (also considers 2008 Santini and Poyer estimates).
25

similar documents