AGGREGATE INDICATORS IN THE QUARTERLY AGRICULTURE FORECASTING MODEL: RETAIL FOOD PRICES

This report discusses a quarterly markup model for retail food prices. Impact, interim, and total multipliers are derived for 15 exogenous variables in order to examine the dynamic properties of the model. Most of the effects on food prices resulting from changes in farm-level prices and food marketing costs occur quickly, usually within two quarters. The transmission to retail prices of changes in farm-level prices and food marketing costs tends to be the quickest for foods requiring relatively little processing, while tending to be longer for more highly processed foods. Within-sample and beyond-sample validation statistics indicate that the model performs well, especially for the major consumer price index aggregates