In: Ekonomický časopis/Journal of Economics, vol. 64, no. 7
Chi-Wei Su - Khalid Khan - Oana-Ramona Lobonţ - Hao-Chang Sung
Details:
Year, pages: 2016, 611 - 628
Keywords:
Consumer Price Index, Producer Price Index, rolling window, time-varying causality, bootstrap
JEL Classification: C32, E31
Article type: Vedecký / Article
About article:
This study examines the causal link between the producer price index (PPI) and the consumer price index (CPI) in Slovakia. We use the bootstrap Granger full sample causality, and the sub-sample rolling window approach and results indicate the unidirectional causality running from the PPI to the CPI. By taking the structural changes into consideration, the full sample causal relationship is unstable and such results are misappropriated. Further, we use a time-varying rolling window approach to revisit the dynamic causal relationship between the PPI and the CPI. It indicates the existence of bi-directional causality between the two series in several sub-samples and the result supports the neoclassical profit-maximizing model, which shows that PPI plays a key role in the CPI in the Slovakia. We find that the PPI has a more contributing role to the CPI so the central bank can minimise the inflation by taking certain predictive measures to keep the input prices under control. The central bank should consider the reliable response of the prices at an aggregated and disaggregated level of production in the formulation of inflation targeting.
This study examines the causal link between the producer price index (PPI) and the consumer price index (CPI) in Slovakia. We use the bootstrap Granger full sample causality, and the sub-sample rolling window approach and results indicate the unidirectional causality running from the PPI to the CPI. By taking the structural changes into consideration, the full sample causal relationship is unstable and such results are misappropriated. Further, we use a time-varying rolling window approach to revisit the dynamic causal relationship between the PPI and the CPI. It indicates the existence of bi-directional causality between the two series in several sub-samples and the result supports the neoclassical profit-maximizing model, which shows that PPI plays a key role in the CPI in the Slovakia. We find that the PPI has a more contributing role to the CPI so the central bank can minimise the inflation by taking certain predictive measures to keep the input prices under control. The central bank should consider the reliable response of the prices at an aggregated and disaggregated level of production in the formulation of inflation targeting.
How to cite:
ISO 690:
Su, C., Khan, K., Lobonţ, O., Sung, H. 2016. Is there any Relationship between Producer Price Index and Consumer Price Index in Slovakia? A Bootstrap Rolling Approach. In Ekonomický časopis/Journal of Economics, vol. 64, no.7, pp. 611-628. 0013-3035.
APA:
Su, C., Khan, K., Lobonţ, O., Sung, H. (2016). Is there any Relationship between Producer Price Index and Consumer Price Index in Slovakia? A Bootstrap Rolling Approach. Ekonomický časopis/Journal of Economics, 64(7), 611-628. 0013-3035.