Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/153602 
Year of Publication: 
2010
Series/Report no.: 
ECB Working Paper No. 1168
Publisher: 
European Central Bank (ECB), Frankfurt a. M.
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.
Subjects: 
food commodity prices
inflation
non-linearities
Pass-Through
JEL: 
C32
C53
E3
Q17
Document Type: 
Working Paper

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