Economists predicted that the plunge in oil prices – from more than $100 a barrel in 2014 to the $40 range in 2016 – would be a windfall for American consumers and would provide a needed boost to discretionary spending. Lower prices at the pump should have translated into an increase in overall consumption. However, greater consumer spending has yet to unfold. In this insightful article, economists Sylvain Leduc, Kevin Moran and Robert J. Vigfusson offer an explanation for this result: consumers’ perceptions of how long oil prices will stay low. getAbstract recommends this informative report to policy makers, investors, business executives and consumers.
In this summary, you will learn
- Why lower oil prices have not translated into higher levels of consumer spending,
- How analytical models portray investor and consumer perceptions, and
- What investors and consumers believe about oil price levels in 2016.
About the Authors
Sylvain Leduc is a vice president at the Federal Reserve Bank of San Francisco. Kevin Moran is an economics professor at Université Laval. Robert J. Vigfusson leads trade and quantitative studies at the Board of Governors of the Federal Reserve System.