Food price pass-through in the euro area The role of asymmetries and non-linearities
AbstractIn this paper we analyse the pass-through of a commodity price shock along the food price chain in the euro area. Unlike the existing literature, which mainly focuses on food commodity prices quoted in international markets, we use a novel database that accounts for the role of the Common Agricultural Policy in the European Union. We model several departures from the linear pass-through benchmark and compare alternative specifications with aggregate and disaggregate food data. Overall, when the appropriate dataset and methodology are used, it is possible to identify a significant and longlasting food price pass-through. The results of our regressions are applied to the strong increase in food prices in the 2007-08 period; a simple decomposition exercise shows that commodity prices are the main determinant of the increase in producer and consumer prices, thus solving the pass-through puzzle highlighted in the existing literature for the euro area. JEL Classification: C32, C53, E3, Q17
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Find related papers by JEL classification:
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models
- C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
- E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
- Q17 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agriculture in International Trade
This paper has been announced in the following NEP Reports:
- NEP-AGR-2010-05-02 (Agricultural Economics)
- NEP-ALL-2010-05-02 (All new papers)
- NEP-CBA-2010-05-02 (Central Banking)
- NEP-EEC-2010-05-02 (European Economics)
- NEP-OPM-2010-05-02 (Open Economy Macroeconomic)
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