Estimation of the Pass-Through Effect of International Food and Energy Prices on Domestic Prices: The Case of Barbados by Darrin Downes, Nlandu Mamingi, Alexis Lescott and Laron Alleyne

Author(s): Central Bank Of Barbados

Created 15 Jan, 2018
Categories Working Papers
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Barbados as a small, very open economy possesses a high dependence on imported goods for production and consumption purposes. As a result, the inflationary process in Barbados is influenced largely by foreign price inflation. Previous research has focused primarily on the determinants of retail price inflation in Barbados and not explicitly on the estimation of the speed of pass-through effects of international commodity prices on domestic inflation. Using quarterly data for the period 1985:Q1 to 2015:Q4, the study estimates a VECM, generalised impulse responses and variance decompositions to capture the speed and magnitude of international commodity price fluctuations. The findings indicate a relatively slow speed of adjustment of domestic prices from disturbances away from equilibrium. International energy prices were found to exhibit a faster rate of pass-thorough to domestic prices in the short-run, while the reverse was found for international food prices in the long run.

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Estimation of the Pass-Through Effect of International Food and Energy Prices on Domestic Prices_The Case of Barbados by Darrin Downes, NlanduMamingi, Alexis Lescott, and Laron Alleyne.pdf (899.54 KB)
Copyright 2018 by Central Bank of Barbados