IDEAS home Printed from https://ideas.repec.org/p/koc/wpaper/1813.html
   My bibliography  Save this paper

Producer Price Inflation Connectedness and Input-Output Networks

Author

Listed:
  • N. Melisa Bilgin

    () (Koç University)

  • Kamil Yilmaz

    () (Koç University)

Abstract

We analyze the transmission of producer price in inflation shocks across the U.S. manufacturing industries from 1947 to 2018 using the Diebold-Yilmaz Connectedness Index framework, which fully utilizes the information in generalized variance decompositions from vector autoregressions. The results show that the system-wide connectedness of the input-output network Granger-causes the producer price inflation connectedness across industries. The input-output network and the inflation connectedness nexus is stronger during periods of major supply-side shocks, such as the global oil and metal price hikes, and weaker during periods of aggregate demand shocks, such as the Volcker disinflation of 1981-84 and the Great Recession of 2008. These findings are consistent with Acemoglu et al. (2016)'s conjecture that supply shocks are transmitted downstream, whereas demand shocks are transmitted upstream. Finally, preliminary results show that Trump tariffs caused an increase in the system-wide inflation connectedness in the first half of 2018, due to shocks mostly transmitted from tariff-targeted industries, namely, basic metals, fabricated metals and machinery.

Suggested Citation

  • N. Melisa Bilgin & Kamil Yilmaz, 2018. "Producer Price Inflation Connectedness and Input-Output Networks," Koç University-TUSIAD Economic Research Forum Working Papers 1813, Koc University-TUSIAD Economic Research Forum.
    • Handle: RePEc:koc:wpaper:1813
    as

    Download full text from publisher

    File URL: http://eaf.ku.edu.tr/sites/eaf.ku.edu.tr/files/erf_wp_1813.pdf
    Download Restriction: no

    More about this item

    Keywords

    Input-output networks; Inflation; Connectedness; Supply-side shocks; Commodity prices; Business cycles; Vector autoregression; Variance decomposition.;

    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • D57 - Microeconomics - - General Equilibrium and Disequilibrium - - - Input-Output Tables and Analysis
    • 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

    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:koc:wpaper:1813. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sumru Oz). General contact details of provider: http://edirc.repec.org/data/dekoctr.html .

    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 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.