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

Author

Listed:
  • 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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Suggested Citation

  • Luca ONORANTE & Gianluigi FERRUCCI & Rebeca JIMÉNEZ-RODRÍGUEZ, 2010. "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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    Cited by:

    1. Rezitis, Anthony N. & Tsionas, Mike, 2019. "Modeling asymmetric price transmission in the European food market," Economic Modelling, Elsevier, vol. 76(C), pages 216-230.
    2. Türken Fatma & Yildirim Mustafa Ozan, 2024. "Second-round effects of food prices on core inflation in Turkey," Economics and Business Review, Sciendo, vol. 10(4), pages 32-55.
    3. Umar Bala & Lee Chin, 2018. "Asymmetric Impacts of Oil Price on Inflation: An Empirical Study of African OPEC Member Countries," Energies, MDPI, vol. 11(11), pages 1-21, November.
    4. 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.
    5. Hudson, John, 2015. "Consequences of Aid Volatility for Macroeconomic Management and Aid Effectiveness," World Development, Elsevier, vol. 69(C), pages 62-74.
    6. 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).
    7. Luca Cacchiarelli & Daniel Lass & Alessandro Sorrentino, 2016. "CAP Reform and Price Transmission in the Italian Pasta Chain," Agribusiness, John Wiley & Sons, Ltd., vol. 32(4), pages 482-497, November.
    8. Sherine Al-Shawarby & Hoda Selim, 2013. "Are International Food Price Spikes the Source of Egypt’s High Inflation?," Financial and Monetary Policy Studies, in: Marga Peeters & Nidal Sabri & Wassim Shahin (ed.), Financial Integration, chapter 0, pages 61-83, Springer.
    9. Salisu, Afees A. & Ogbonna, Ahamuefula E., 2019. "Another look at the energy-growth nexus: New insights from MIDAS regressions," Energy, Elsevier, vol. 174(C), pages 69-84.
    10. 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.
    11. Cullen S. Hendrix, 2011. "Markets vs. Malthus: Food Security and the Global Economy," Policy Briefs PB11-12, Peterson Institute for International Economics.
    12. 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.
    13. Maurizio Aragrande & Mauro Bruni & Alberico Loi & Roberto Esposti, 2017. "The effect of EU 2006 sugar regime reform on vertical price transmission," Agricultural and Food Economics, Springer;Italian Society of Agricultural Economics (SIDEA), vol. 5(1), pages 1-20, December.
    14. 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.
    15. Lachezar Borisov, 2022. "The Relationship Between Food Production Prices And Inflation In Bulgaria," Economic Archive, D. A. Tsenov Academy of Economics, Svishtov, Bulgaria, issue 1 Year 20, pages 34-43.
    16. Mora Barrenechea, Mauricio, 2020. "Time-varying effects of commodities prices in the Bolivian economy," MPRA Paper 104706, University Library of Munich, Germany.
    17. 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.
    18. 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.

    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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