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Russian food inflation and world food prices

Author

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  • Denis Krylov

    (Bank of Russia, Russian Federation)

Abstract

Movements in food prices have a major input in consumer price index and, thus, a significant impact on the living standards. Given the increased volatility of world food prices, it is essential that we understand the impact of this external driver of inflation on domestic price trends in order to produce a more accurate forecast of inflation and conduct a more efficient monetary policy. This work presents a VARX model applied to data from 2003 to 2021. Statistically significant impact of world food prices on domestic consumer and producer food prices in Russia was observed in 2003-2014, both at nation level and across its regions. After 2014, when there was a transition to a floating exchange rate, inflation targeting policy, accelerated development of import-substituting agricultural production and the Russian government employment of a more active trade policy in agriculture and food products, the average pass- through effect declined materially and is no longer statistically significant. The overall pass-through effect is greater in the case of rising world prices compared to decreasing world prices, while no statistically significant differences are found among regions. Meanwhile, the pass-through effect of world food prices on internal producer prices exhibits a significant regional heterogeneity.

Suggested Citation

  • Denis Krylov, 2024. "Russian food inflation and world food prices," Bank of Russia Working Paper Series wps126, Bank of Russia.
    • Handle: RePEc:bkr:wpaper:wps126
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    References listed on IDEAS

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    1. Ha, Jongrim & Marc Stocker, M. & Yilmazkuday, Hakan, 2020. "Inflation and exchange rate pass-through," Journal of International Money and Finance, Elsevier, vol. 105(C).
    2. Carine Meyimdjui & Jean-Louis Combes, 2021. "Food Price Shocks and Household Consumption in Developing Countries: The Role of Fiscal Policy," IMF Working Papers 2021/012, International Monetary Fund.
    3. Vadim Napalkov & Anna Novak & Andrey Shulgin, 2021. "Variations in the Effects of a Single Monetary Policy: The Case of Russian Regions," Russian Journal of Money and Finance, Bank of Russia, vol. 80(1), pages 3-45, March.
    4. Martina Jašová & Richhild Moessner & Elöd Takáts, 2019. "Exchange Rate Pass-Through: What Has Changed Since the Crisis?," International Journal of Central Banking, International Journal of Central Banking, vol. 15(3), pages 27-58, September.
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    Keywords

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    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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