IS THERE ANY RELATIONSHIP BETWEEN PRODUCER PRICE INDEX AND CONSUMER PRICE INDEX IN SLOVAKIA? A BOOTSTRAP ROLLING APPROACH

• Authors: Su Chi-Wei , Khan Khalid , Lobont Oana-Ramona , Sung Hao-Chang
• Languages of publication: EN

Abstracts

EN

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.

Keywords

EN

CONSUMER PRICE INDEX; PRODUCER PRICE INDEX; TIME-VARYING CAUSALITY; BOOTSTRAP; SLOVAKIA

• Publisher: Institute of Slovak and World Economics and Institute for Forecasting, Slovak Academy of Sciences
• Journal: Ekonomický časopis (Journal of Economics)
• Year: 2016
• Volume: 64
• Issue: 7
• Pages: 611 – 628

Contributors

author

Su Chi-Wei

• Ocean University of China, Department of Finance, No. 238 Songling Rd., Qingdao, Shandong, China

author

Khan Khalid

author

Lobont Oana-Ramona

author

Sung Hao-Chang