Monitoring and forecasting food prices in the euro area

Lucía Cuadro-Sáez, Corinna Ghirelli, Maximiliano Moreno-López and Javier J. Pérez
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Lucía Cuadro-Sáez: BANCO DE ESPAÑA
Corinna Ghirelli: BANCO DE ESPAÑA
Maximiliano Moreno-López: BANCO DE ESPAÑA AND PARIS SCHOOL OF ECONOMICS
Javier J. Pérez: BANCO DE ESPAÑA

No 2025, Occasional Papers from Banco de España

Abstract: This paper presents a comprehensive framework developed by the Banco de España to monitor and forecast food price dynamics in the euro area, particularly in response to the sharp increase in food inflation observed between 2022 and 2024. The study introduces a suite of models tailored to different aspects of the food value chain, integrating data from consumer and producer prices, farm-gate prices and international commodity and futures markets. Key tools include a Food Value Chain Model (VARx) to estimate the pass-through of commodity and fuel price shocks to consumer prices, an Asymmetric Price Transmission Model to capture non-linear effects and a Conditional Forecasting framework using different modelling approaches and futures data to simulate inflation scenarios. Additionally, a Vector Error Correction Model (VECM) assesses the long-term relationship between food and non-food prices. These tools aim to enhance central bank decision-making and food security analysis by providing timely, scenario-based insights into food inflation trends.

Keywords: food prices; food inflation; inflation; euro area; monitoring; forecasting; central bank (search for similar items in EconPapers)
JEL-codes: C53 E31 Q11 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2025-10
New Economics Papers: this item is included in nep-eec and nep-mon
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https://www.bde.es/f/webbe/SES/Secciones/Publicaci ... 25/Files/do2521e.pdf First version, October 2025 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:bde:opaper:2521e

DOI: 10.53479/41245

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