Propagation of inflationary shocks in Chile
When a specific price is affected by a shock, this may spread to other prices and thus affect the overall inflation rate by more than the initial effect. This phenomenon is known as propagation of inflationary shocks and is the subject investigated in the present paper. It is argued that two-dimensional VAR models, with an imposed Cholesky decomposition, are suitable for the propagation analysis when the data vector includes the component affected by the initial shock and the rest of the CPI basket. The empirical analysis with annual Chilean inflation rates suggests that the duration of propagation has generally diminished after September 1999, even though the impact is higher for a couple of divisions. Propagation is statistically significant for most of the divisions included in the consumer basket, but the effects of propagation are quite disperse, which should be taken into account when evaluating policy options in response to increasing inflation rates.
Volume (Year): 19 (2016)
Issue (Month): 3 (December)
|Contact details of provider:|| Postal: Casilla No967, Santiago|
Phone: (562) 670 2000
Fax: (562) 698 4847
Web page: http://www.bcentral.cl/
More information through EDIRC
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.:
- Filippo Altissimo & Michael Ehrmann & Frank Smets, 2006. "Inflation persistence and price-setting behaviour in the euro area : a summary of the Inflation Persistence Network evidence," Working Paper Research 95, National Bank of Belgium.
- Luis F. Céspedes & Claudio Soto, 2007.
"Credibility and Inflation Targeting in Chile,"
Central Banking, Analysis, and Economic Policies Book Series,in: Frederic S. Miskin & Klaus Schmidt-Hebbel & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Se (ed.), Monetary Policy under Inflation Targeting, edition 1, volume 11, chapter 14, pages 547-578
Central Bank of Chile.
- Claudio Soto & Luis F. Céspedes, 2006. "Credibility and Inflation Targeting in Chile," Working Papers Central Bank of Chile 408, Central Bank of Chile.
- Miguel Fuentes, 2007. "Pass-Through to Import Prices: Evidence from Developing Countries," Documentos de Trabajo 320, Instituto de Economia. Pontificia Universidad Católica de Chile..
- Michael Pedersen & Hernán Rubio & Carlos Saavedra, 2009. "Empalme de subclases del IPC de Chile Series mensuales 1989-2008," Economic Statistics Series 79, Central Bank of Chile.
- Munir Jalil & Esteban Tamayo, 2011. "Pass-through of International Food Prices to Domestic Inflation During and After the Great Recession: Evidence from a Set of Latin American Economies," REVISTA DESARROLLO Y SOCIEDAD, UNIVERSIDAD DE LOS ANDES-CEDE, June.
- Michael Pedersen, 2015. "Propagation of Shocks to Food and Energy Prices: A Cross-Country Analysis," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 65(4), pages 272-289, August.
- Pablo Pincheira B., 2009. "La Dinámica de la Persistencia Inflacionaria en Chile," Notas de Investigación Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, vol. 12(1), pages 97-104, April.
- Eduardo López E. & Francisco Meneses P. & Felipe Córdova F. & M. Carolina Grünwald N., 2008. "Comportamiento del Precio Internacional de Granos Seleccionados y su Impacto en la Inflación," Notas de Investigación Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, vol. 11(1), pages 119-129, April.
- Santiago Justel & Andrés Sansone, 2015. "Exchange Rate Pass-Through to Prices: VAR Evidence for Chile," Working Papers Central Bank of Chile 747, Central Bank of Chile.
- Pesaran, H. Hashem & Shin, Yongcheol, 1998. "Generalized impulse response analysis in linear multivariate models," Economics Letters, Elsevier, vol. 58(1), pages 17-29, January.
- Pesaran, M. H. & Shin, Y., 1997. "Generalised Impulse Response Analysis in Linear Multivariate Models," Cambridge Working Papers in Economics 9710, Faculty of Economics, University of Cambridge.
- Jose De Gregorio, 2007. "Defining Inflation Targets, the Policy Horizon and the Output-Inflation Tradeoff," Working Papers Central Bank of Chile 415, Central Bank of Chile.
- Roberto Álvarez & Patricio Jaramillo & Jorge Selaive, 2008. "Exchange Rate Pass-Through into Import Prices: The Case of Chile," Working Papers Central Bank of Chile 465, Central Bank of Chile.
- Juan Pablo Medina & Claudio Soto, 2005. "Oil Shocks and Monetary Policy in an Estimated DSGE Model for a Small Open Economy," Working Papers Central Bank of Chile 353, Central Bank of Chile.
- Juselius, Katarina, 2006. "The Cointegrated VAR Model: Methodology and Applications," OUP Catalogue, Oxford University Press, number 9780199285679.
- Kilian, Lutz, 2001. "Impulse Response Analysis in Vector Autoregressions with Unknown Lag Order," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 20(3), pages 161-179, April.
- Roberto Álvarez E. & Gustavo Leyva J. & Jorge Selaive C., 2008. "Traspaso de Tipo de Cambio a Precios: Una Aproximación Microeconómica," Notas de Investigación Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, vol. 11(3), pages 105-112, December.
- Maravall, Agustin, 1993. "Stochastic linear trends : Models and estimators," Journal of Econometrics, Elsevier, vol. 56(1-2), pages 5-37, March.
- Lucas Bertinatto & Diego Saravia, 2015. "El Rol de Asimetrías en el Pass-Through: Evidencia para Chile," Working Papers Central Bank of Chile 750, Central Bank of Chile.
- Carlos José García T. & Jorge Enrique Restrepo, 2003. "Price Inflation and Exchange Rate Pass-Trough in Chile," Money Affairs, Centro de Estudios Monetarios Latinoamericanos, vol. 0(1), pages 69-88, January-J.
- Michael Pedersen & Miguel Ricaurte, 2013. "Efectos de Shocks al Precio del Petróleo sobre la Economía de Chile y sus Socios Comerciales," Working Papers Central Bank of Chile 691, Central Bank of Chile. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:chb:bcchec:v:19:y:2016:i:3:p:004-025. 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: (Claudio Sepulveda)
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.