Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/296081 
Year of Publication: 
2024
Series/Report no.: 
CESifo Working Paper No. 10992
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
This paper uses the endogenous regime switching model with dynamic feedback and interactions developed by Chang et al. (2023) to estimate global food price mean and volatility indicators, the latter measuring uncertainty and risk in the global food market. Both are then included in structural VAR models to examine their effects on domestic food price inflation for a range of countries with different food shares in total consumption and in the CPI basket. Next, counterfactual analysis is carried out to assess the effects on core inflation. The results suggest that both global food price mean and volatility shocks have sizeable effects on food price inflation in all countries and persistent second-round effects on core inflation in most countries. An extension of the analysis using disaggregate global food price data shows that the existence of second-round effects is independent of the size of the response of domestic food inflation to global food price shocks. These findings imply that policymakers should distinguish carefully between the two types of global food price shocks (namely mean or volatility) and their effects on core inflation to formulate appropriate policy responses.
Subjects: 
food price volatility
core inflation
endogenous regime switching
second-round effects
JEL: 
C13
C58
E31
Q10
Document Type: 
Working Paper
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