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

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