Discussion Paper

How Much Will the Rise in Commodity Prices Reduce Discretionary Income?

Abstract: Commodity prices have risen considerably since August 2010, raising concerns that higher commodity prices could reduce households’ discretionary income and slow the recovery. For example, as former Federal Reserve Board Vice Chairman Donald Kohn said in the Wall Street Journal last fall: “… the surge in international commodity prices. If that persists it could hurt Americans’ disposable income, especially as it is reflected in higher gas and energy prices.” Is that concern warranted?

Keywords: discretionary income; Commodity prices; personal consumption expenditures (PCE);

JEL Classification: E2;

Bibliographic Information

Provider: Federal Reserve Bank of New York

Part of Series: Liberty Street Economics

Publication Date: 2011-03-23

Number: 20110323