Work

Effects of commodity price shocks on inflation: a cross-country analysis

Year: 2018

Type: article

Abstract: Large fluctuations in commodity prices since the 2000s are a renewed concern among policymakers about price stability. This paper investigates the effects of commodity price shocks on headline inflation with a cross-country panel. We find that the effects of commodity price shocks on inflation virtually disappear within about one year after the shock. This transitory effect suggests a low risk of a persistent second-round effect on inflation. While the effect on the price level varies across country groups, the transitory effect is fairly robust. We also allow for the possibility that the effect of commodity price shocks may vary, depending on inflation regimes. Even in this case, we observe the transitory effects at least in countries with exchange-rate flexibility.

Source: Oxford Economic Papers

DOI: 10.1093/oep/gpy015

Authors: Atsushi Sekine, Takayuki Tsuruga

Institutions: Waseda University, Government of Japan, Institute of Social and Economic Research, The University of Osaka, Cabinet Office, The University of Osaka

Language: English

Topic: Market Dynamics and Volatility

Subfield: Economics and Econometrics

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: green

Funders: Japan Center for Economic Research, Japan Society for the Promotion of Science

Awards: G3326911320, Risk Management of Comprehensive Monetary/Fiscal Policy: Theory, Empirics, and Simulations, G3456836483, G900451228, Behavioral-Economic Analysis of Long-Run Stagnation