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How Core Inflation Reacts to the Second Round Effects

Simion Mija, Dorin Slobozian (), Radu Cuhal () and Alexandru Stratan
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Dorin Slobozian: National Bank of Moldova, Monetary Policy and Research Department, Republic of Moldova
Radu Cuhal: National Bank of Moldova, Monetary Policy and Research Department, Republic of Moldova

Journal for Economic Forecasting, 2013, issue 1, 98-118

Abstract: In order to evaluate the second round effects on core inflation, an econometric model based on auto-regressive vector technique was built. The way the core inflation reacts to the changes of oil and food prices on international markets, is an important matter for monetary policy. Another important issue for monetary policy is outlined by the internal markets, and mainly the way the core inflation responds, accordingly, to the changes of the fuel and food prices. The payoff of these changes on core inflation is a priori considered to be significant. The paper tests the above-mentioned hypothesis and the results of the study justify the impact of changes in oil and food prices on core inflation.

Keywords: core inflation; second round effects; commodity price; autoregressive vector; exchange rate; transmission mechanism; inflation. (search for similar items in EconPapers)
JEL-codes: E31 E52 (search for similar items in EconPapers)
Date: 2013
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Handle: RePEc:rjr:romjef:v::y:2013:i:1:p:98-118