Pass-through of International Food Prices to Domestic Inflation During and After the Great Recession: Evidence from a Set of Latin American Economies

Munir Jalil (majalilb@unal.edu.co) and Esteban Tamayo (etamayoz@gmail.com)

Revista Desarrollo y Sociedad, 2011

Abstract: We looked at how international food price shocks have impacted local inflation processes in Brazil, Chile, Colombia, Mexico, and Peru in the past decade. Using impulse-response analysis coming from cointegrated vars, we find that international food inflation shocks take from one to six quarters to pass through to domestic headline inflation, depending on the country. In addition, by calculating the elasticity of local prices to an international food price shock, we found that this pass-through is not complete. We also take a closer look at how this type of shock affects local food and core prices separately, and asses the possibility second round effects over core inflation stemming from the shock. We find that a transmission to headline prices does occur, and that part of the transmission is associated with rising core prices both directly and through possible second round effects, which implies a role for monetary policy when such a shock takes place. This is especially relevant given that international food prices have recently followed an upward trend after falling considerably during the Great Recession.

Keywords: Food inflation; fao food price index; Latin American inflation; second round effects. (search for similar items in EconPapers)
JEL-codes: C32 E31 E50 (search for similar items in EconPapers)
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

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Persistent link: https://EconPapers.repec.org/RePEc:col:000090:008922

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