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How Core Inflation Reacts to the Second Round Effects

Author

Listed:
  • Mija, Simion

    (National Bank of Moldova, Monetary Policy and Research Department, Republic of Moldova)

  • Slobozian, Dorin

    (National Bank of Moldova, Monetary Policy and Research Department, Republic of Moldova)

  • Cuhal, Radu

    (National Bank of Moldova, Monetary Policy and Research Department, Republic of Moldova)

  • Stratan, Alexandru

    (Institute of Economy, Finances and Statistics, Republic of Moldova)

Abstract

In order to evaluate the second round effects on core inflation, an econometric model based on auto-regressive vector technique was built. The way the core inflation reacts to the changes of oil and food prices on international markets, is an important matter for monetary policy. Another important issue for monetary policy is outlined by the internal markets, and mainly the way the core inflation responds, accordingly, to the changes of the fuel and food prices. The payoff of these changes on core inflation is a priori considered to be significant. The paper tests the above-mentioned hypothesis and the results of the study justify the impact of changes in oil and food prices on core inflation.

Suggested Citation

  • Mija, Simion & Slobozian, Dorin & Cuhal, Radu & Stratan, Alexandru, 2013. "How Core Inflation Reacts to the Second Round Effects," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(1), pages 98-118, March.
  • Handle: RePEc:rjr:romjef:v::y:2013:i:1:p:98-118
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    References listed on IDEAS

    as
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    Cited by:

    1. Salome Tvalodze & Shalva Mkhatrishvili & Tamar Mdivnishvili & Davit Tutberidze & Zviad Zedgenidze, 2016. "The National Bank of Georgia's Forecasting and Policy Analysis System," NBG Working Papers 01/2016, National Bank of Georgia.
    2. International Monetary Fund, 2015. "Cross-Country Report on Inflation: Selected Issues," IMF Staff Country Reports 2015/184, International Monetary Fund.
    3. Misati, Roseline Nyakerario & Munene, Olive, 2015. "Second Round Effects And Pass-Through Of Food Prices To Inflation In Kenya," International Journal of Food and Agricultural Economics (IJFAEC), Alanya Alaaddin Keykubat University, Department of Economics and Finance, vol. 3(3), pages 1-13, July.

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    More about this item

    Keywords

    core inflation; second round effects; commodity price; autoregressive vector; exchange rate; transmission mechanism; inflation.;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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