The Linkage of Global Raw Material Prices and Taiwan's CPI Level
Hu, Jin-Li, Chin-Yi Fang and Tsung-Hsien Kuo (2009), "Linkage of Global Raw Material Prices and Taiwan's CPI Level," Empirical Economics Letters, Vol. 8, No. 3, pp.261-270.
10 Pages Posted: 27 Apr 2012
Date Written: March 2009
This paper examines cointegration and Granger causality between Taiwan’s consumer price index (CPI) and raw material import price indices, including crude oil, steel, copper, aluminum, corn, and soybean with monthly data during 1991-2007. By applying Hsiao's version of the Granger causality method, causality running from crude oil import price and corn import price to CPI is found. The impulse-response simulations show that the CPI tends to have positive responses to the shock of crude oil, steel, corn, and soybean import price indices at the initial period. In response to these shocks, the CPI fluctuates up and down around the pre-shock level and gradually becomes stable after 20 months.
Keywords: Consumer price index (CPI), Raw material import price indices, Cointegration, Granger causality
JEL Classification: C53, E31, N75, O13
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