IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this article

Do producer prices lead consumer prices?

  • Todd E. Clark

From early 1994 to early 1995, inflation surged in the producer price indexes for crude materials and intermediate goods. For example, inflation in intermediate goods prices rose from 2.6 percent annually in the first half of 1994 to 7.1 percent over the next nine months. At the same time, however, inflation in the consumer price index remained low, at slightly less than 3 percent. Many analysts are concerned that recent increases in the prices of crude and intermediate goods may be passed through to consumers. If such pass-through occurs, the Federal Reserve's progress in moving toward price stability over time would be jeopardized.> Clark examines whether price increases at the early stages of production should be expected to move through the production chain, leading to increases in consumer prices. A review of basic economic theory suggests there should be a pass-through effect--that is, producer prices should lead and thereby help predict consumer prices. A more sophisticated analysis, though, suggests the pass-through effect may be weak. Clark examines the empirical evidence, which indicates that producer prices are not always good predictors of consumer prices. He concludes that the recent increases in some producer prices do not necessarily signal higher inflation.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.kansascityfed.org/publicat/econrev/pdf/3q95clar.pdf
Download Restriction: no

Article provided by Federal Reserve Bank of Kansas City in its journal Economic Review.

Volume (Year): (1995)
Issue (Month): Q III ()
Pages: 25-39

as
in new window

Handle: RePEc:fip:fedker:y:1995:i:qiii:p:25-39:n:v.80no.3
Contact details of provider: Postal:
One Memorial Drive, Kansas City, MO 64198

Phone: (816) 881-2254
Web page: http://www.kansascityfed.org

More information through EDIRC

Order Information: Email:


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.:

as in new window
  1. Jeffrey A. Miron & Stephen P. Zeldes, . "Seasonality, Cost Shocks and the Production Smoothing Model of Inventories," Rodney L. White Center for Financial Research Working Papers 01-87, Wharton School Rodney L. White Center for Financial Research.
  2. Oliver Jean Blanchard, 1987. "Aggregate and Individual Price Adjustment," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 18(1), pages 57-122.
  3. Chirinko, R S & Fazzari, S, 1994. "Economic Fluctuations, Market Power, and Returns to Scale: Evidence from Firm-Level Data," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 9(1), pages 47-69, Jan.-Marc.
  4. C. Alan Garner, 1995. "How useful are leading indicators of inflation?," Economic Review, Federal Reserve Bank of Kansas City, issue Q II, pages 5-18.
  5. Ben S. Bernanke & James Powell, 1986. "The Cyclical Behavior of Industrial Labor Markets: A Comparison of the Prewar and Postwar Eras," NBER Chapters, in: The American Business Cycle: Continuity and Change, pages 583-638 National Bureau of Economic Research, Inc.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:fip:fedker:y:1995:i:qiii:p:25-39:n:v.80no.3. 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: (LDayrit)

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.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.