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

35 Pages Posted: 19 Apr 2010

See all articles by Gianluigi Ferrucci

Gianluigi Ferrucci

European Central Bank (ECB)

Rebeca Jiménez-Rodríguez

University of Salamanca - Department of Economics and Economic History

Luca Onorante

European Central Bank (ECB); European University Institute

Date Written: March 25, 2010

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.

Keywords: food commodity prices, inflation, non-linearities, pass-through

JEL Classification: C32, C53, E3, Q17

Suggested Citation

Ferrucci, Gianluigi and Jiménez-Rodríguez, Rebeca and Onorante, Luca, Food Price Pass-Through in the Euro Area - The Role of Asymmetries and Non-Linearities (March 25, 2010). ECB Working Paper No. 1168. Available at SSRN: https://ssrn.com/abstract=1578209

Gianluigi Ferrucci (Contact Author)

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Rebeca Jiménez-Rodríguez

University of Salamanca - Department of Economics and Economic History ( email )

Salamanca, 37008
Spain

Luca Onorante

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

European University Institute

Villa Schifanoia
133 via Bocaccio
Firenze (Florence), Tuscany 50014
Italy

Register to save articles to
your library

Register

Paper statistics

Downloads
101
Abstract Views
738
rank
269,483
PlumX Metrics