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Food Price Pass-Through in the Euro Area: the Role of Asymmetries and Non-Linearities

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  • Luca ONORANTE
  • Gianluigi FERRUCCI
  • Rebeca JIMÉNEZ-RODRÍGUEZ

Abstract

In this paper we analyse the pass-through of a commodity price shock along the food price chain in the euro area. Unlike the existing literature, which mainly focuses on food commodity prices quoted in international markets, we use a novel database that accounts for the role of the Common Agricultural Policy in the European Union. We model several departures from the linear pass-through benchmark and compare alternative specifications with aggregate and disaggregate food data. Overall, when the appropriate dataset and methodology are used, it is possible to identify a significant and longlasting food price pass-through. The results of our regressions are applied to the strong increase in food prices in the 2007-08 period; a simple decomposition exercise shows that commodity prices are the main determinant of the increase in producer and consumer prices, thus solving the pass-through puzzle highlighted in the existing literature for the euro area. JEL Classification: C32, C53, E3, Q17
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  • Luca ONORANTE & Gianluigi FERRUCCI & Rebeca JIMÉNEZ-RODRÍGUEZ, "undated". "Food Price Pass-Through in the Euro Area: the Role of Asymmetries and Non-Linearities," EcoMod2010 259600125, EcoMod.
  • Handle: RePEc:ekd:002596:259600125
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    References listed on IDEAS

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    Cited by:

    1. Martin Gächter & Hanno Lorenz & Paul Ramskogler & Maria Antoinette Silgoner, 2013. "An Export-Based Measure of Competitiveness," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), issue 2, pages 75-92.
    2. Luca Gattini & Huw Pill & Ludger Schuknecht, 2015. "A global perspective on inflation and propagation channels," Journal of Banking and Financial Economics, University of Warsaw, Faculty of Management, vol. 1(3), pages 50-76, May.
    3. Elena I. Ianchovichina & Josef L. Loening & Christina A. Wood, 2014. "How Vulnerable are Arab Countries to Global Food Price Shocks?," Journal of Development Studies, Taylor & Francis Journals, vol. 50(9), pages 1302-1319, September.
    4. Hudson, John, 2015. "Consequences of Aid Volatility for Macroeconomic Management and Aid Effectiveness," World Development, Elsevier, vol. 69(C), pages 62-74.
    5. Cacchiarelli, Luca & Lass, D. A. & Sorrentino, A., 2013. "CAP reform and price transmission in the pasta chain," 2013 Second Congress, June 6-7, 2013, Parma, Italy 149925, Italian Association of Agricultural and Applied Economics (AIEAA).
    6. Michael Pedersen, 2011. "Propagation of Shocks to Food and Energy Prices: an International Comparison," Working Papers Central Bank of Chile 648, Central Bank of Chile.
    7. Jasmien De Winne & Gert Peersman, 2016. "Macroeconomic Effects of Disruptions in Global Food Commodity Markets: Evidence for the United States," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 47(2 (Fall)), pages 183-286.
    8. Carraro, Alessandro & Stefani, Gianluca, 2011. "Price Transmission in Three Italian Food Chains: A Structural Break Approach," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland 114317, European Association of Agricultural Economists.
    9. Al-Shawarby, Sherine & Selim, Hoda, 2012. "Are international food price spikes the source of Egypt's high inflation ?," Policy Research Working Paper Series 6177, The World Bank.
    10. Cullen S. Hendrix, 2011. "Markets vs. Malthus: Food Security and the Global Economy," Policy Briefs PB11-12, Peterson Institute for International Economics.

    More about this item

    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
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • Q17 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agriculture in International Trade

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