Do food commodity prices have asymmetric effects on Euro-Area inflation?

Mario Porqueddu () and Fabrizio Venditti
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Mario Porqueddu: Bank of Italy

No 878, Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: This paper analyzes the relationship between commodity prices and consumer food prices in the euro area and in its largest economies (Germany, France and Italy) and tests whether the latter respond asymmetrically to shocks to the former. The issue is of particular interest for those monetary authorities that target headline consumer price inflation, which has been heavily influenced by pronounced swings in international commodity prices in the past decade. The empirical analysis is based on two distinct but complementary approaches. First, we employ a structural model to identify a shock to commodity prices and verify using formal econometric tests whether the Impulse Response Functions of food consumer prices is invariant to the sign of the commodity price shock. Next, we employ predictive regressions and examine the relative forecasting ability of linear models compared with that of models that allow for sign-dependent nonlinearities. Overall, the empirical analysis uncovers very little evidence of asymmetries.

Keywords: food prices; asymmetry; inflation (search for similar items in EconPapers)
JEL-codes: C32 C53 E31 Q17 (search for similar items in EconPapers)
Date: 2012-09
New Economics Papers: this item is included in nep-agr, nep-eec and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Journal Article: Do food commodity prices have asymmetric effects on euro-area inflation? (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:bdi:wptemi:td_878_12

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