IDEAS home Printed from https://ideas.repec.org/p/cpr/ceprdp/20621.html

The Transmission of Shocks across Sectors and the Dynamics of Sectoral Prices

Author

Listed:
  • Monti, Francesca
  • Van Keirsbilck, Leila

Abstract

This paper explores the dynamics of U.S. sectoral producer prices in a large Bayesian vector autoregressive (BVAR) model where information from the Input-Output (IO) matrix is used to structure the long-run relationships between these time series. The forecasts of headline inflation generated with this model have accuracy comparable to those from the Survey of Professional Forecasters (SPF) and greater than those generated by a standard BVAR with Minnesota priors, confirming that the IO matrix long-run prior conveys relevant information about the data. We analyze the effects of different types of shocks on sectoral prices and aggregate inflation, identified using instrumental variables, and trace the cascade effects through which sectoral shocks propagate along the pricing chain, finding substantial heterogeneity in both adjustment dynamics and sectoral contributions. The analysis of the propagation of an aggregate shock like monetary policy through the network of sectors instead sheds light on the importance of each sector in the transmission of the monetary policy shock.

Suggested Citation

  • Monti, Francesca & Van Keirsbilck, Leila, 2025. "The Transmission of Shocks across Sectors and the Dynamics of Sectoral Prices," CEPR Discussion Papers 20621, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:20621
    as

    Download full text from publisher

    File URL: https://cepr.org/publications/DP20621
    Download Restriction: no
    ---><---

    More about this item

    Keywords

    ;
    ;
    ;

    JEL classification:

    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:20621. See general information about how to correct material in RePEc.

    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.

    We have no bibliographic references for this item. You can help adding them by using 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: CEPR (email available below). General contact details of provider: https://cepr.org/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.