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Pass-through of International Food Prices to Domestic Inflation During and After the Great Recession: Evidence from a Set of Latin American Economies

  • Munir Jalil

    ()

  • Esteban Tamayo

    ()

We looked at how international food price shocks have impacted local inflation processes in Brazil, Chile, Colombia, Mexico, and Peru in the past decade. Using impulse-response analysis coming from cointegrated vars, we find that international food inflation shocks take from one to six quarters to pass through to domestic headline inflation, depending on the country. In addition, by calculating the elasticity of local prices to an international food price shock, we found that this pass-through is not complete. We also take a closer look at how this type of shock affects local food and core prices separately, and asses the possibility second round effects over core inflation stemming from the shock. We find that a transmission to headline prices does occur, and that part of the transmission is associated with rising core prices both directly and through possible second round effects, which implies a role for monetary policy when such a shock takes place. This is especially relevant given that international food prices have recently followed an upward trend after falling considerably during the Great Recession.

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File URL: http://economia.uniandes.edu.co/revistadys/67/04_Food_Price.pdf
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Article provided by UNIVERSIDAD DE LOS ANDES-CEDE in its journal REVISTA DESARROLLO Y SOCIEDAD.

Volume (Year): (2011)
Issue (Month): ()
Pages:

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Handle: RePEc:col:000090:008922
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  8. Lutkepohl, Helmut & Reimers, Hans-Eggert, 1992. "Impulse response analysis of cointegrated systems," Journal of Economic Dynamics and Control, Elsevier, vol. 16(1), pages 53-78, January.
  9. Kahler, Miles, 1985. "Politics and international debt: explaining the crisis," International Organization, Cambridge University Press, vol. 39(03), pages 357-382, June.
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  11. Leandro Medina, 2010. "The Dynamic Effects of Commodity Priceson Fiscal Performance in Latin America," IMF Working Papers 10/192, International Monetary Fund.
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