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Food price pass-through in the euro area The role of asymmetries and non-linearities

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  • Ferrucci, Gianluigi
  • Jiménez-Rodríguez, Rebeca
  • Onorante, Luca

Abstract

In 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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Bibliographic Info

Paper provided by European Central Bank in its series Working Paper Series with number 1168.

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Date of creation: Apr 2010
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Handle: RePEc:ecb:ecbwps:20101168

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Keywords: food commodity prices; inflation; non-linearities; Pass-Through;

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Cited by:
  1. Al-Shawarby, Sherine & Selim, Hoda, 2012. "Are international food price spikes the source of Egypt's high inflation ?," Policy Research Working Paper Series 6177, The World Bank.
  2. Martin Gächter & Hanno Lorenz & Paul Ramskogler & Maria Antoinette Silgoner, 2013. "An Export-Based Measure of Competitiveness," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), issue 2, pages 75–92.
  3. Carraro, Alessandro & Stefani, Gianluca, 2011. "Price Transmission in Three Italian Food Chains: A Structural Break Approach," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland 114317, European Association of Agricultural Economists.
  4. Cullen S. Hendrix, 2011. "Markets vs. Malthus: Food Security and the Global Economy," Policy Briefs PB11-12, Peterson Institute for International Economics.
  5. Michael Pedersen, 2011. "Propagation of Shocks to Food and Energy Prices: an International Comparison," Working Papers Central Bank of Chile 648, Central Bank of Chile.
  6. Cacchiarelli, L. & Lass, D. A. & Sorrentino, A., 2013. "CAP reform and price transmission in the pasta chain," 2013 Second Congress, June 6-7, 2013, Parma, Italy 149925, Italian Association of Agricultural and Applied Economics (AIEAA).

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