A structural analysis for inflation in the United States

Abstract

Inflation in all economies is a thermometer of economic activity, its financial stability and one of the most important parameters of the purchasing power of a country. In this sense, the study of the direct determinants of inflation is crucial to prevent inflationary shocks in the short and medium term. Since the last century, monetary variables have been linked as sole causes of inflation, completely excluding the structural inflationary approach. The purpose of this article is to investigate in the determination of inflation by structural origins, the central hypothesis being that the price of regular gasoline as a direct cause of inflation. The different inflationary theories are studied and the transfer of the oil price to the inflation of the United States (an economy with ultra-low inflation rates) is examined. To corroborate this hypothesis, an Autorregressive Movil Average Exogenous (ARMAX) econometric model is performed, which links gasoline prices and inflation lags as inflationary determinants. Finally, monthly data is forecast for 2019 inflation.