Commodity Price Pass-Through and Inflation in Japan: A Nonlinear Time Series Analysis

8 Pages Posted: 14 Jun 2023 Last revised: 30 Oct 2023

See all articles by Atsushi Sekine

Atsushi Sekine

School of Political Science and Economics, Meiji University

Date Written: October 29, 2023

Abstract

Declining pass-through of commodity prices in Japan has been reported in the related literature. In this study, I investigate why the pass-through has declined in Japan over time. By estimating the threshold autoregressive model that considers past inflation rates, I find that the short- and long-run pass-throughs are lower in low-inflation regimes. This suggests that the state of inflation plays an important role in understanding declining pass-through in Japan. Second, energy prices have a significant effect on inflation in both the short and long run. However, I could not identify the effects of non-energy prices on inflation. This result suggests that the Bank of Japan needs to pay significant attention to energy prices to control inflation, particularly when it faces high inflation.

Keywords: commodity price, pass-through, inflation, threshold autoregressive model

JEL Classification: C22, E31, Q43

Suggested Citation

Sekine, Atsushi, Commodity Price Pass-Through and Inflation in Japan: A Nonlinear Time Series Analysis (October 29, 2023). Available at SSRN: https://ssrn.com/abstract=4475687 or http://dx.doi.org/10.2139/ssrn.4475687

Atsushi Sekine (Contact Author)

School of Political Science and Economics, Meiji University ( email )

1-1 Kanda Surugadai
Surugadai, Chiyoda, 101-8301
Japan

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