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Asymmetric Shocks and Co-movement of Price Indices

Author

Listed:
  • Nasir Hamid Rao

    (US Embassy, Islamabad)

  • Syed Kalim Hyder Bukhari

    (State Bank of Pakistan)

Abstract

This paper is an attempt to gauge the relationship between the long run paths of consumer price index and wholesale price index of Pakistan. For the empirical analysis the Johansen co-integration technique has been applied on monthly data (1978 to 2010) of WPI and CPI. This paper found that both the indices are co-integrated in the long run. Thus the deviations in movements of WPI and CPI in the short run are transitory and both the indices will converge to their coherent path in the long run. Therefore, inflation computed from CPI can be used as official measure of inflation without worrying for short run ovements of WPI.

Suggested Citation

  • Nasir Hamid Rao & Syed Kalim Hyder Bukhari, 2011. "Asymmetric Shocks and Co-movement of Price Indices," SBP Working Paper Series 38, State Bank of Pakistan, Research Department.
    • Handle: RePEc:sbp:wpaper:38
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    References listed on IDEAS

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    Cited by:

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    2. Gómez Aguirre Mario & Lenin Navarro Chávez José César, 2014. "Relación de causalidad entre el índice de precios del productor y el índice de precios del consumidor incorporando cambios estructurales. El caso de México," Contaduría y Administración, Accounting and Management, vol. 59(2), pages 179-196, abril-jun.
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    More about this item

    Keywords

    Price level; time series models; monetary policy;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • 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
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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