Causality Links between Consumer and Producer Prices: Some Empirical Evidence

Caporale, Guglielmo Maria; Katsimi, Margarita; Pittis, Nikitas

doi:10.2307/1061728

Cited by 39 publications

(31 citation statements)

References 17 publications

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“…Shunmugam (2009) finds evidence of cointegration over the entire period of study but in the pre-and post liberalization period evidence of cointegration was not found. Caporale et al (2002) reported bidirectional causality between WPI and CPI (or even no significant links) and claimed it only exists when the causality links reflecting the monetary transmission mechanism are ignored. Ghazali et al, (2008) by using monthly data for CPI and PPI at constant prices of 2000 for the period from January 1986 to April 2007 for Malaysia find that there is an unidirectional causality running from PPI to CPI.…”

Section: A Brief Review Of Literaturementioning

confidence: 99%

“…In response this implies that consumer prices (CPI) should determine or affect producer prices (WPI). Moreover, development was made by Caporale, et al (2002) in this direction. Caporale, et al (2002) documented that CPI may cause WPI through the labor supply channel and which may also reflects through supply shocks in labor market provided wage earners in the wholesale sector want to preserve the purchasing power of their incomes.…”

Section: Introductionmentioning

confidence: 99%

“…Moreover, development was made by Caporale, et al (2002) in this direction. Caporale, et al (2002) documented that CPI may cause WPI through the labor supply channel and which may also reflects through supply shocks in labor market provided wage earners in the wholesale sector want to preserve the purchasing power of their incomes. This effect occurs with lagged -period, it probably depends on the nature of wage-setting process along with expectations of machinery formation.…”

Section: Introductionmentioning

confidence: 99%

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Modelling the Relationship between Whole Sale Price and Consumer Price Indices: Cointegration and Causality Analysis for India

Tiwari

Shahbaz

2013

Global Business Review

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In this study we attempted to analyze the static and dynamic causality between producers' prices measured by WPI and consumers' prices measured by CPI in the context of India. We did our analysis in the framework of time series and for analysis, we applied ARDL bounds testing approach to cointegration and robustness of ARDL approach is examined through Johansen and Juselius (1990) maximum likelihood approach over the period of 1950-2009. We found the evidence of bidirectional causality between WPI and CPI in both cases i.e., in the short-run and long-run. Furthermore, outside sample forecast analysis reveals that in India, WPI leads CPI. This implies that WPI is determined by market forces and also a leading indicator of consumers' prices and inflation. This gives an indication to the Indian policy analysts to control for factors affecting WPI in order to have control on CPI since CPI is used for indexation purposes for many wage and salary earners including government employees and hence it will be helpful in cutting down the excess government expenditure.

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Section: A Brief Review Of Literaturementioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Modelling the Relationship between Whole Sale Price and Consumer Price Indices: Cointegration and Causality Analysis for India

Tiwari

Shahbaz

2013

Global Business Review

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“…The results have yielded conflicting evidence. For example, Caporale et al (2002) investigated the causality issue using Toda and Yamamoto (1995) for G7 countries for the period January 1976 to April 1999. They found that PPI lead CPI in France and Germany.…”

Section: Introductionmentioning

confidence: 99%

Do Producer Prices Cause Consumer Prices? Some Empirical Evidence

Ghazali¹,

Yee²,

Muhammad³

2009

IJBM

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The main purpose of this paper is to examine the relationship between consumer price index (CPI) and producer price index (PPI) in Malaysia. This research considers monthly data of consumer price index and producer price index from January 1986 to April 2007. The Johansen cointegration method suggests that there is long-run equilibrium relationship between these two variables. Both Engle Granger and Toda-Yamamoto causality tests find that there is uni-directional causality running from PPI to CPI.

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“…For instance, in the article by Caporale et al (2002), the authors analyze the nature of the existing relationship between the PPI and the CPI for the G7 countries during the period from January 1976 to April 1999. The methodology used involves the estimation of a bivariate vector autoregressive (VAR) model, whose results point to one direction Granger (1969) causality from the PPI to the CPI in France and Germany.…”

Section: Literature Reviewmentioning

confidence: 99%

Exploring the Relationship between the CPI and the PPI: The Colombian Case

Osvaldo¹,

R.²,

G.³

et al. 2013

IJBM

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This article explores the nature of the existing relationship between the Producer Price Index (PPI) and the Consumer Price Index (CPI). In particular, it seeks to determine whether the PPI can be considered a leading indicator of the CPI, using the methodology of coincident profiles proposed by Martinez (2010), which modifies the one presented by Banerji (1999). Previous studies for Colombia and other countries found links of all types between these two price indexes. Yet, there is no evidence of previous studies that have eliminated the methodological differences between the two baskets, at least in the international literature reviewed for this article. However, when these discrepancies are removed (homogenization of items and weights), desirable results are found for the Colombian case; namely, the PPI leads the CPI and, depending on the analyzed group, this leadership might anticipate evolution of the CPI by one month or even more. These findings clearly are useful as input to improve consumer inflation forecasting models and the monetary authority's decision-making process.

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Causality Links between Consumer and Producer Prices: Some Empirical Evidence

Cited by 39 publications

References 17 publications

Modelling the Relationship between Whole Sale Price and Consumer Price Indices: Cointegration and Causality Analysis for India

Modelling the Relationship between Whole Sale Price and Consumer Price Indices: Cointegration and Causality Analysis for India

Do Producer Prices Cause Consumer Prices? Some Empirical Evidence

Exploring the Relationship between the CPI and the PPI: The Colombian Case

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