 Can monetary policy stabilise food inflation? Evidence from advanced and emerging economiesRudrani Bhattacharya and Richa Jain Economic Modelling, 2020, vol. 89, issue C, 122-141 Abstract: This paper addresses a long-standing political debate as how effective is monetary policy to stabilise food inflation. While a wealth of theoretical literature suggests a stabilising role of monetary policy via aggregate demand channel, there exists hardly any empirical consensus on this issue. Very recently, a limited strand of empirical literature has attempted to shed light in this arena. The present study contributes to this literature by analysing the effectiveness of aggregate demand channel in presence of production cost channel of monetary policy transmission, affecting prices positively via supply side, in a panel of developed and emerging economies for the period 2006 Q1 to 2016 Q2. We find that an unexpected monetary tightening has a positive and significant effect on food inflation in both advanced and emerging economies. Our findings suggest that in the backdrop of inflationary pressure stemming from the food sector, a monetary tightening may turn out to be destabilising for the food as well as overall inflation in the economy. Keywords: Food inflation; Monetary policy; Emerging economies; Panel vector auto-regression (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:89:y:2020:i:c:p:122-141 DOI: 10.1016/j.econmod.2019.10.005 Access Statistics for this article Economic Modelling is currently edited by S. Hall and P. Pauly More articles in Economic Modelling from Elsevier |
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