Cover IMF Working Papers
Buy Book in Print
Greenflation or Greensulation? The Case of Fuel Excise Taxes and Oil Price Pass-through
Author:
JaeBin Ahn
Search for other papers by JaeBin Ahn in
Current site
Google Scholar Close
Series:
IMF Working Papers
Volume/Issue:
Volume 2024: Issue 153
Language:
English
Publication Date:
12 Jul 2024
DOI:
https://doi.org/10.5089/9798400280993.001
ISBN:
9798400280993
ISSN:
1018-5941
Pages:
36
Keywords:
Fuel excise tax; gasoline tax; diesel tax; oil price pass-through; retail fuel price; inflation; greenflation; greensulation; inflation volatility; headline CPI inflation rates; oil price shock; back-of-the-envelope calculation; Oil prices; Fuel tax; Fuel prices; Excises; Global
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
Download PDF (3 MB) Download Epub
Can a carbon tax reduce inflation volatility? Focusing on fuel excise taxes, this paper provides systematic evidence on their role as a shock absorber that helps mitigating the impact of global oil price shocks on domestic inflation. Exploiting substantial variation in fuel tax rates across 28 OECD countries over the period from 2014 to 2021, a simple idea that a per-unit, specific tax takes up a portion of the product price immune to cost shocks goes a long way toward explaining heterogeneity in the degree of oil price pass-through into domestic inflation across countries. A back-of-the-envelope calculation from the estimation results supports its quantitative significance---differences in fuel tax rates could explain about 30% of the variation in annual headline CPI inflation rates observed between the U.S. and U.K. during the 2021 inflation surge.
  • Collapse
  • Expand
Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund