Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/278597 
Year of Publication: 
2023
Series/Report no.: 
WIFO Working Papers No. 663
Publisher: 
Austrian Institute of Economic Research (WIFO), Vienna
Abstract: 
Cross-demand creates links between goods which cause demand-driven cross-price dependencies. We construct a theoretical model to analyze their role in propagating microeconomic price shocks to the CPI inflation rate and examine their empirical relevance using spatial econometric techniques. The results highlight the importance of complementarity and substitution properties between goods in exacerbating or mitigating price shocks. This contrasts with the propagation through the production network. Most importantly, demand-driven cross-price dependencies determine the impact of producer prices on the CPI inflation rate.
Subjects: 
Inflation
Consumer behavior
Cross price dependencies
Network analysis
JEL: 
C11
C53
D85
E31
Document Type: 
Working Paper

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