Effects of Commodity Price Shocks on Inflation : A Cross-Country Analysis

Since 2000s, large fluctuations in non-energy commodity prices have become a concern among policymakers about price stability. Using local projections, this paper investigates the effects of commodity price shocks on inflation. We estimate impulse responses of the consumer price indexes (CPIs) to commodity price shocks from a monthly panel consisting of 120 countries. Our analyses show that the effects of commodity price shocks on inflation are transitory. While the effect on the level of consumer prices varies across countries, the transitory effects on inflation are fairly robust, suggesting that policymakers may not need to pay special attention to the recent fluctuation in non-energy commodity prices. Employing the smooth transition autoregessive models that use the past inflation rate as the transition variable, we also explore the possibility that the effect of commodity price shocks is influenced by the inflation regimes. In this specification, commodity prices may not have transitory effects when a country is less developed and its currency is pegged to the U.S. dollar. However, the effect remains transitory in developed countries with exchange rate flexibility.2012～2016年度科学研究費補助金[基盤研究(S)]「長期デフレの解明」(研究代表者 東京大学経済学研究科・渡辺努, 課題番号：24223003