The impact of food inflation on core inflation in Brazil: a time-varying parameter approach

Diego Ferreira (), Andreza Palma (), Ana Kreter () and José Ronaldo Souza jr ()
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Diego Ferreira: Federal University of São Paulo (UNIFESP), Brazil
Ana Kreter: University of Applied Sciences Rhine-Waal, Germany
José Ronaldo Souza jr: Institute of Applied Economic Research

Economics Bulletin, 2025, vol. 45, issue 1, 537 - 543

Abstract: TThis paper investigates the impact of food inflation on core inflation in Brazil using a time-varying parameter vector autoregression model with stochastic volatility (TVP-VAR-SV). Employing Bayesian methods, we estimate the model using monthly data from August 1999 to January 2023. Our findings reveal a substantial increase in the volatility of the relationship between food and core inflation during the COVID-19 pandemic. We find a statistically significant pass-through from food inflation to core inflation. Food inflation represents a substantial challenge, especially for Central Banks in emerging economies, and these findings carry important implications for monetary policy formulation and implementation.

Keywords: food inflation; core inflation; time-varying models; bayesian econometrics; stochastic volatility (search for similar items in EconPapers)
JEL-codes: C5 E5 (search for similar items in EconPapers)
Date: 2025-03-30
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