Advanced Search
MyIDEAS: Login to save this article or follow this journal

Causality between consumer price and producer price: Evidence from Mexico

Contents:

Author Info

  • Tiwari, Aviral Kumar
  • Suresh K.G.,
  • Arouri, Mohamed
  • Teulon, Frédéric

Abstract

We examine the relationship between two inflation indices, consumer price index (CPI) and producer price index (PPI) for Mexico, a case study country which has successfully implemented inflation targeting after the economic crisis and high inflationary situation in 1995. Since the causality running from PPI to CPI exemplifies the cost push nature of inflation and the opposite is the indicator of demand pull inflation, this analysis could provide significant policy implications. We contribute to the literature by decomposing the time–frequency relationship between CPI and PPI through continuous wavelet approach. Our results indicate a bidirectional relationship between CPI and PPI. In short periods (1 to 7months scale) CPI is leading PPI, while for longer periods (8 to 32months scale) PPI is the leading variable.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.sciencedirect.com/science/article/pii/S0264999313004197
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by Elsevier in its journal Economic Modelling.

Volume (Year): 36 (2014)
Issue (Month): C ()
Pages: 432-440

as in new window
Handle: RePEc:eee:ecmode:v:36:y:2014:i:c:p:432-440

Contact details of provider:
Web page: http://www.elsevier.com/locate/inca/30411

Related research

Keywords: Inflation; Consumer price index; Producer price index; Wavelet approach;

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Muhammad Shahbaz & Abu N. M. Wahid & Adnan Haider, 2010. "Empirical Psychology Between Wholesale Price And Consumer Price Indices: The Case Of Pakistan," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 55(03), pages 537-551.
  2. Tiwari, Aviral Kumar, 2012. "An empirical investigation of causality between producers' price and consumers' price indices in Australia in frequency domain," Economic Modelling, Elsevier, Elsevier, vol. 29(5), pages 1571-1578.
  3. Aguiar-Conraria, Luís & Azevedo, Nuno & Soares, Maria Joana, 2008. "Using wavelets to decompose the time–frequency effects of monetary policy," Physica A: Statistical Mechanics and its Applications, Elsevier, Elsevier, vol. 387(12), pages 2863-2878.
  4. Manuel Ramos Francia & Alberto Torres García, 2005. "Reducing Inflation Through Inflation Targeting: The Mexican Experience," Working Papers 2005-01, Banco de México.
  5. José Julián Sidaoui & Carlos Capistrán & Daniel Chiquiar & Manuel Ramos Francia, 2009. "A Note on the Predictive Content of PPI over CPI Inflation: The Case of Mexico," Working Papers 2009-14, Banco de México.
  6. Todd E. Clark, 1995. "Do producer prices lead consumer prices?," Economic Review, Federal Reserve Bank of Kansas City, issue Q III, pages 25-39.
  7. Barro, Robert J & Gordon, David B, 1983. "A Positive Theory of Monetary Policy in a Natural Rate Model," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 91(4), pages 589-610, August.
  8. Shahbaz, Muhammad & Tiwari, Aviral Kumar & Tahir, Mohammad Iqbal, 2012. "Does CPI Granger-cause WPI? New extensions from frequency domain approach in Pakistan," Economic Modelling, Elsevier, Elsevier, vol. 29(5), pages 1592-1597.
  9. Aviral Kumar Tiwari, 2012. "Causality between wholesale price and consumer price indices in India: An empirical investigation in the frequency domain," Indian Growth and Development Review, Emerald Group Publishing, Emerald Group Publishing, vol. 5(2), pages 151-172, December.
  10. Colclough, William G. & Lange, Mark D., 1982. "Empirical evidence of causality from consumer to wholesale prices," Journal of Econometrics, Elsevier, Elsevier, vol. 19(2-3), pages 379-384, August.
  11. Gang Fan & Liping He & Jiani Hu, 2009. "CPI vs. PPI: Which drives which?," Frontiers of Economics in China, Springer, Springer, vol. 4(3), pages 317-334, September.
  12. Akdi, Yilmaz & Berument, Hakan & Mümin Cilasun, Seyit, 2006. "The relationship between different price indices: Evidence from Turkey," Physica A: Statistical Mechanics and its Applications, Elsevier, Elsevier, vol. 360(2), pages 483-492.
  13. Guglielmo Maria Caporale & Margarita Katsimi & Nikitas Pittis, 2002. "Causality Links between Consumer and Producer Prices: Some Empirical Evidence," Southern Economic Journal, Southern Economic Association, vol. 68(3), pages 703-711, January.
  14. Luís Aguiar-Conraria & Maria Soares, 2011. "Oil and the macroeconomy: using wavelets to analyze old issues," Empirical Economics, Springer, Springer, vol. 40(3), pages 645-655, May.
  15. Jones, J D, 1986. "Consumer Prices, Wholesale Prices, and Causality (More Empirical Evidence for the U.S., 1947-1983.)," Empirical Economics, Springer, Springer, vol. 11(1), pages 41-55.
  16. Tiwari, Aviral Kumar & Mutascu, Mihai & Andries, Alin Marius, 2013. "Decomposing time-frequency relationship between producer price and consumer price indices in Romania through wavelet analysis," Economic Modelling, Elsevier, Elsevier, vol. 31(C), pages 151-159.
  17. Toda, Hiro Y. & Yamamoto, Taku, 1995. "Statistical inference in vector autoregressions with possibly integrated processes," Journal of Econometrics, Elsevier, Elsevier, vol. 66(1-2), pages 225-250.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Abid, Ilyes & Kaabia, Olfa & Guesmi, Khaled, 2014. "Stock market integration and risk premium: Empirical evidence for emerging economies of South Asia," Economic Modelling, Elsevier, Elsevier, vol. 37(C), pages 408-416.
  2. Rangan Gupta & Patrick T. kanda & Mampho P. Modise & Alessia Paccagnini, 2013. "DSGE Model-Based Forecasting of Modeled and Non-Modeled Inflation Variables in South Africa," Working Papers 201374, University of Pretoria, Department of Economics.
  3. Riadh Aloui & Mohamed Safouane Ben Aissa & Duc Khuong Nguyen, 2014. "A wavelet-based copula approach for modeling market risk in agricultural commodity markets," Working Papers 2014-412, Department of Research, Ipag Business School.
  4. Rangan Gupta & Lardo Stander, 2014. "Endogenous Fluctuations in an Endogenous Growth Model with Inflation Targeting," Working Papers 201432, University of Pretoria, Department of Economics.
  5. Essahbi Essaadi & Zied Ftiti, 2008. "The inflation Targeting effect on the inflation series: ANew Analysis Approach of evolutionary spectral analysis," Post-Print halshs-00355637, HAL.
  6. Stephen M. Miller & Luis F. Martins & Rangan Gupta, 2014. "A Time-Varying Approach of the US Welfare Cost of Inflation," Working Papers 201419, University of Pretoria, Department of Economics.
  7. Pejman Bahramian & Mehmet Balcilar & Rangan Gupta & Patrick T. Kanda, 2014. "Forecasting South African Ination Using Non-linear Models: A Weighted Loss-based Evaluation," Working Papers 2014-471, Department of Research, Ipag Business School.
  8. Anis Omri & Amel Sassi-Tmar, 2014. "Linking FDI inflows to economic growth in North African countries," Working Papers 2014-558, Department of Research, Ipag Business School.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:eee:ecmode:v:36:y:2014:i:c:p:432-440. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.