International Food Commodity Prices and Missing (Dis)Inflation in the Euro Area
Gert Peersman ()
No 350, Working Paper Research from National Bank of Belgium
This paper examines the causal eﬀects of shifts in international food commodity prices on euro area inﬂation dynamics using a structural VAR model that is identiﬁed with an external instrument (i.e. a series of global harvest shocks). The results reveal that exogenous food commodity price shocks have a strong impact on consumer prices, explaining on average 25%-30% of inﬂation volatility. In addition, large autonomous swings in international food prices contributed signiﬁcantly to the twin puzzle of missing disinﬂation and missing inﬂation in the era after the Great Recession. Speciﬁcally, without disrup- tions in global food markets, inﬂation in the euro area would have been 0.2%-0.8% lower in the period 2009-2012 and 0.5%-1.0% higher in 2014-2015. An analysis of the transmission mechanism shows that international food price shocks have an impact on food retail prices through the food production chain, but also trigger indirect eﬀects via rising inﬂation expectations and a depreciation of the euro.
Keywords: Food commodity prices; inﬂation; twin puzzle; euro area; SVAR-IV (search for similar items in EconPapers)
JEL-codes: E31 E52 Q17 (search for similar items in EconPapers)
Pages: 44 pages
New Economics Papers: this item is included in nep-agr, nep-eec, nep-mac and nep-mon
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Working Paper: International Food Commodity Prices and Missing (Dis)Inflation in the Euro Area (2018)
Working Paper: INTERNATIONAL FOOD COMMODITY PRICES AND MISSING (DIS)INFLATION IN THE EURO AREA (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:nbb:reswpp:201810-350
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