Are International Food Price Spikes the Source of Egypt's High Inflation?
This paper examines whether domestic inflation spikes in Egypt during 2001-2011 were primarily the result of external food price shocks. To estimate the pass-through of international food price inflation to domestic price inflation, two different m...
| Main Authors: | , |
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2012
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2012/08/16620776/international-food-price-spikes-source-egypts-high-inflation http://hdl.handle.net/10986/12021 |
| Summary: | This paper examines whether domestic
inflation spikes in Egypt during 2001-2011 were primarily
the result of external food price shocks. To estimate the
pass-through of international food price inflation to
domestic price inflation, two different methodologies are
used: a two-step regression model estimates the pass-through
in the long run, and a vector autoregression model provides
the short-run estimates. The empirical evidence confirms
that pass-through is high in the short term, but not in the
long run. More precisely, the results show that (i) long-run
pass-through to domestic food inflation is relatively low,
lying between 13 and 16 percent, while the long-term
spill-over from domestic food inflation to core inflation is
moderate, lying around 60 percent; (ii) in the short term,
pass-through is relatively high, estimated around 29 percent
after 6 months and around two-thirds after a year, but the
spill-over effect to core inflation is limited; (iii)
international food price shocks explain only a small portion
of domestic inflation shocks in both the short and long
terms; and (iv) international price inflation has asymmetric
effects on domestic prices. |
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