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Does PPI lead CPI IN Brazil?

Roberto Ivo da Rocha Lima Filho

International Journal of Production Economics, 2019, vol. 214, issue C, 73-79

Abstract: The main question of the paper is to add an additional explanation to an economic empirical causality between PPI (Producer Price Index) and CPI (Consumer Price Index), that is, does PPI's final stage of processing, also known as final goods, is a lead indicator for the CPI in the Brazilian economy? If so, how strong or weak this relationship is? Is there a one-way or two-way causality? How does exogenous shocks affect both variables in terms of future trajectories? This is analysed empirically through a traditional VAR (Vector Autoregressive) and BVAR (Bayesian Vector Autoregressive) models so as to understand the dynamics of both PPI and CPI - inertial and principal components - and also out-of-sample forecasting. We conclude that it can be verified that PPI final goods can be a good leading indicator for the domestic CPI, purging ex - in natura foods.

Keywords: Inflation; Vector autoregressive; Bayesian vector autoregressive (search for similar items in EconPapers)
JEL-codes: E31 E47 C11 C32 C53 (search for similar items in EconPapers)
Date: 2019
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