Causality between food prices and other goods prices: Evidence from the EU member-states
The purpose of this paper was to investigate and measure the causation between food consumer price index and all-other-items consumer price index in 14 European Union member-states, using monthly data covering the period from 1985:12 to 1998:12. For this purpose a four stages approach was employed: Firstly, the non-stationarity of the data involved was investigated using the Augmented Dickey-Fuller tests. Secondly, causation was investigated using the Granger causality tests. Thirdly, the long-run equilibrium relationship between the two variables involved was estimated employing the Johansen cointegration approach. Fourthly, the short-term disequilibrium relationship between these two variables was estimated employing the Error-Correction-Models methodology. The findings of the paper generally support the hypothesis that for the vast majority of the EU member-states there exist a unidirectional Granger causality from all-other-items consumer prices to food consumer prices.
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- Dickey, David A & Fuller, Wayne A, 1981. "Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root," Econometrica, Econometric Society, vol. 49(4), pages 1057-72, June.
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