Fuel-Price Shocks and Inflation in Latin America and the Caribbean
We estimate the impact of fuel-commodity price shocks on inflation and inflation expectations for eight Latin American countries in which monetary policy follows inflation-targeting frameworks. We use Bayesian Vector Autoregressive models (BVARs) and data from 2005 and up to 2022 to quantify these impacts. We find that the fuel-price shocks are significant in all cases and the response ranges between 0.01 and 0.04 percentage points of inflation, following a 1 p.p. shock to fuel prices. A variance decomposition exercise shows that more than 50% of the outburst in inflation that these countries experienced in 2021 and 2022 can be attributed to the shock in global fuel prices. These results are robust to changes in the specification that include additional controls, different commodity price measures, different lag structures, and alternative ordering.
Main Author: | Inter-American Development Bank |
---|---|
Other Authors: | Arturo Galindo |
Language: | English |
Published: |
Inter-American Development Bank
|
Subjects: | Inflation, Commodity Price, Output Gap, Fuel Price, Freight Logistic, Inflation Targeting, External Shock, E31 - Price Level • Inflation • Deflation, E52 - Monetary Policy, Q43 - Energy and the Macroeconomy, |
Online Access: | http://dx.doi.org/10.18235/0004724 https://publications.iadb.org/en/fuel-price-shocks-and-inflation-latin-america-and-caribbean |
Tags: |
Add Tag
No Tags, Be the first to tag this record!
|
Similar Items
-
Creation and Evolution of Inflation Expectations in Paraguay
by: Inter-American Development Bank -
Inflation Dynamics in Latin America and the Caribbean
by: Inter-American Development Bank -
Fiscal Policy and Inflation: Understanding the Role of Expectations in Mexico
by: Inter-American Development Bank -
Exchange Rate Pass-through in South America: An Overview
by: Inter-American Development Bank -
The Time-Varying Degree of Inflation Expectation Anchoring in Bolivia
by: Inter-American Development Bank