The relevance of supply shocks for inflation: the spanish case

Caraballo, M. Ángeles; Usabiaga, Carlos

doi:10.1080/00036840601007443

Cited by 9 publications

(6 citation statements)

References 14 publications

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“…11 These results suggest that in the presence of skewness higher (lower) variance will increase (decrease) the inflation. These results are consistent with the predictions of menu cost models and many empirical findings (for example, Amano & Macklem, 1997; Assarsson, 2003; Caraballo & Dabus, 2008; Pou & Dabus, 2008). These empirical results provide strong evidence on the view that skewness of the distribution of relative price changes and aggregate inflation are positively related, as predicted by the Ball and Mankiw (1995).…”

Section: Resultssupporting

confidence: 91%

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Price Rigidity, Inflation and the Distribution of Relative Price Changes

Rather

Durai

Ramachandran

2015

South Asian Journal of Macroeconomics and Public Finance

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This study examines whether skewness of the cross-sectional distribution of relative price changes is positively associated with aggregate inflation as predicted by the menu cost model of Ball and Mankiw (1994, 1995). Further, the study examines the size and frequency of price changes across various commodities and the distribution of relative price changes. The results from highly disaggregated Indian wholesale price index (WPI) data suggest that the skewness of relative price changes explains a significant proportion of short-run fluctuations in aggregate inflation. More importantly, the results indicate that the average size of price increases is greater than the size of price decreases implying downwards rigidity in the prices of various commodities. JEL Classification: E30, E31, E52

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Section: Resultssupporting

confidence: 91%

“…3A number of studies extended this literature by empirically examining the reliability of skewness as an alternative measure of supply shocks (see, for example, Caraballo et al, 2006; Catik et al, 2010). …”

mentioning

confidence: 99%

Price Rigidity, Inflation and the Distribution of Relative Price Changes

Rather

Durai

Ramachandran

2015

South Asian Journal of Macroeconomics and Public Finance

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“…Existing empirical literature on the commodity shocks‐inflation nexus are mixed. Using VAR methodologies, a number of studies found incomplete pass‐through of external shocks to inflation, a small role of external shocks in explaining variations in inflation and a significant role of domestic shocks in explaining inflation (Duma, ; Gachet et al ., ; Caraballo and Usabiaga, ; Krznar and Kunovac, ). In some places such as Asia, the insignificance of the role of commodity prices in inflation is partly explained by the provision of huge subsidies of food and fuel and stiff competition that forces producers not to pass on higher input costs to consumers.…”

Section: Literature Reviewmentioning

confidence: 99%

Commodity price shocks and inflation in a net oil‐importing economy

Misati¹,

Nyamongo²,

Mwangi³

2013

OPEC Energy Review

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The global economy experienced sharp spikes in food and oil prices in 2008–2009 and 2011 period. Oil prices and food price shocks are believed to have played a prominent role in the build‐up of persistent inflationary pressures in Kenya in the recent past. This study uses Granger causality and structural vector autoregressive (SVAR) methods to examine the dynamic linkages between commodity prices and both overall inflation and non‐food non‐fuel inflation. The study finds a significant role of oil and food prices in both measures of inflation. Specifically, the study reveals that food prices are more important than oil prices in explaining overall and non‐food non‐fuel inflation when both variables are considered in the same VAR framework. However, the effect of oil prices on inflation is more persistent than the effect of food prices. The paper also finds that the food and oil inflation effects have more significant influence on non‐food non‐fuel inflation than money supply growth rate and that oil price shocks immediately depreciate the exchange rate. Based on the results, the study recommends adoption of measures to reduce oil dependence, usage of targeted intervention rather than tax waivers during crisis periods, strengthening of supply response measures and a neutral monetary policy stance in the face of shocks unless they get entrenched in the non‐food non‐fuel inflation.

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“…al. (2010) and Caraballo et. al., (2009) have empirically examined the reliability of skewness as an alternative measure of supply shock in various countries.…”

Section: Introductionmentioning

confidence: 95%

Asymmetric impact of relative price shocks in presence of trend inflation

Rather

2018

Applied Economics Letters

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This study examines whether skewness of cross sectional distribution of relative price shocks has asymmetric impact on aggregate inflation. The empirical evidence from various countries suggests that the positively skewed shocks have different impact from that of negatively skewed shocks on aggregate inflation. Consistent with the predictions of menu cost models, the empirical results indicate that this asymmetry in the impact of relative price shocks mainly depends on the nature of trend that inflation exhibits for a given period. The crucial inference that emerges from the empirical findings is that the traditional approach of using a linear regression model, to examine the relationship between inflation and skewness during the period with trend inflation, is not appropriate as it may result in misspecification and misleading conclusions.

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The relevance of supply shocks for inflation: the spanish case

Cited by 9 publications

References 14 publications

Price Rigidity, Inflation and the Distribution of Relative Price Changes

Price Rigidity, Inflation and the Distribution of Relative Price Changes

Commodity price shocks and inflation in a net oil‐importing economy

Asymmetric impact of relative price shocks in presence of trend inflation

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