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

Author/Editor: Ustyugova, Yulia | Gelos, Gaston
Authorized for Distribution: September 1, 2012
Electronic Access: Free Full Text (PDF file size is 660KB)
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.

Summary: 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.
 
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Series: Working Paper No. 12/225
Subject(s): Commodity price fluctuations | Cross country analysis | External shocks | Governance | Inflation | Inflation targeting | Monetary policy
Author's keyword(s): inflation | commodity prices | pass-through | Phillips curve
 
English  
    Published:   September 1, 2012        
            Format:   Paper
    Stock No:   WPIEA2012225   Pages:   32
    Price:   US$18.00 (Academic Rate: US$18.00 )
       
     
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