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Commodity prices and inflation: an application of structural VAR

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  • Mahdi Shahrazi
  • Saman Ghaderi
  • Bahram Sanginabadi

Abstract

The potential influence of global commodity prices on consumer price inflation has been a concern of researchers and policymakers for decades. Even though a body of literature has investigated such connections, the results are mixed. This study uses a structural vector autoregressive (SVAR) model to investigate the impact of global commodity prices on Iran’s inflation over the 2009:1-2018:11 period. We have included commodity price, exchange rate, and stock returns as explanatory variables in our model. Based on the findings of our long-run multiplier matrix the response of inflation to the commodity price shocks is positive and statistically significant. In other words, global commodity prices increase Iranian inflation. Also, the results suggest that the explanatory power of commodity price shocks in inflation fluctuations is higher than those of exchange rate and stock returns in the long run.

Suggested Citation

  • Mahdi Shahrazi & Saman Ghaderi & Bahram Sanginabadi, 2023. "Commodity prices and inflation: an application of structural VAR," Applied Economics, Taylor & Francis Journals, vol. 55(27), pages 3110-3120, June.
    • Handle: RePEc:taf:applec:v:55:y:2023:i:27:p:3110-3120
    DOI: 10.1080/00036846.2022.2108753
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    Cited by:

    1. Qian, Chenqi & Zhang, Tianding & Li, Jie, 2023. "The impact of international commodity price shocks on macroeconomic fundamentals: Evidence from the US and China," Resources Policy, Elsevier, vol. 85(PB).

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