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Monitoring and forecasting food prices in the euro area

Author

Listed:
  • Lucía Cuadro-Sáez

    (BANCO DE ESPAÑA)

  • Corinna Ghirelli

    (BANCO DE ESPAÑA)

  • Maximiliano Moreno-López

    (BANCO DE ESPAÑA AND PARIS SCHOOL OF ECONOMICS)

  • Javier J. Pérez

    (BANCO DE ESPAÑA)

Abstract

This paper presents a comprehensive framework developed by the Banco de España to monitor and forecast food price dynamics in the euro area, particularly in response to the sharp increase in food inflation observed between 2022 and 2024. The study introduces a suite of models tailored to different aspects of the food value chain, integrating data from consumer and producer prices, farm-gate prices and international commodity and futures markets. Key tools include a Food Value Chain Model (VARx) to estimate the pass-through of commodity and fuel price shocks to consumer prices, an Asymmetric Price Transmission Model to capture non-linear effects and a Conditional Forecasting framework using different modelling approaches and futures data to simulate inflation scenarios. Additionally, a Vector Error Correction Model (VECM) assesses the long-term relationship between food and non-food prices. These tools aim to enhance central bank decision-making and food security analysis by providing timely, scenario-based insights into food inflation trends.

Suggested Citation

  • Lucía Cuadro-Sáez & Corinna Ghirelli & Maximiliano Moreno-López & Javier J. Pérez, 2025. "Monitoring and forecasting food prices in the euro area," Occasional Papers 2025, Banco de España.
    • Handle: RePEc:bde:opaper:2521e
    DOI: https://doi.org/10.53479/41245
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    File URL: https://www.bde.es/f/webbe/SES/Secciones/Publicaciones/PublicacionesSeriadas/DocumentosOcasionales/25/Files/do2521e.pdf
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    References listed on IDEAS

    as
    1. Hamilton, James D., 1996. "This is what happened to the oil price-macroeconomy relationship," Journal of Monetary Economics, Elsevier, vol. 38(2), pages 215-220, October.
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    More about this item

    Keywords

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    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • Q11 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Aggregate Supply and Demand Analysis; Prices

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