Inflation Responses to Commodity Price Shocks - How and Why Do Countries Differ?

33 Pages Posted: 1 Nov 2012

See all articles by Yulia Ustyugova

Yulia Ustyugova

International Monetary Fund (IMF)

Gaston Gelos

Bank for International Settlements; Centre for Economic Policy Research (CEPR)

Date Written: September 2012

Abstract

This paper relates the inflationary impact of commodity price shocks across countries to a broad range of structural characteristics and policy frameworks over the period 2001-2010, using several approaches. The analysis suggests that economies with higher food shares in CPI baskets, fuel intensities, and pre-existing inflation levels were more prone to experience sustained inflationary effects from commodity price shocks. Countries with more independent central banks and higher governance scores seem to have contained the impact of these shocks better. The effect of the presence of inflation targeting regimes, however, appears very modest and not evident during the 2008 food price shock. The evidence suggests that trade openness, financial development, dollarization, and labor market flexibility do not significantly influence the way in which domestic inflation responds to international commodity price shocks.

Keywords: Commodity Prices, Pass-through, Phillips Curve, External Shocks, Governance, Inflation Targeting

JEL Classification: E31, F41, E50, E52, E60

Suggested Citation

Ustyugova, Yulia and Gelos, R. Gaston, Inflation Responses to Commodity Price Shocks - How and Why Do Countries Differ? (September 2012). IMF Working Paper No. 12/225, Available at SSRN: https://ssrn.com/abstract=2169769

Yulia Ustyugova (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

R. Gaston Gelos

Bank for International Settlements ( email )

Centralbankplatz 2
Basel, 4002
Switzerland
0612808201 (Phone)

HOME PAGE: http://https://www.bis.org/author/gaston_gelos.htm

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
87
Abstract Views
689
Rank
523,966
PlumX Metrics