Divergent movements in CPI and PPI: Interaction between Domestic and International Factors
Read
DownLoad |
| Title | Divergent movements in CPI and PPI: Interaction between Domestic and International Factors
|
| Author | He Liping,Hu Zaiyong and Li Na |
| Organization | Beijing Normal University and China Foreign Affairs University |
| Email | lphe@bnu.edu.cn, lina4088@126.com；huzaiyong@cfau.edu.cn |
| Key Words | CPI, PPI, Tradable and non-tradable sector, spatial panel data model |
| Abstract | Once again China sees divergent movements in CPI and PPI, which has caused a good deal of attention at home. Yet the phenomenon is not an isolated one that only exists in the country. Many economies in the world have witnessed similar movements. The paper suggests a two-sector framework in analyzing the issue: PPI reflects underlying trends more in tradable goods than CPI, and the latter does more in non-tradable goods. Therefore, the law of one price is presumably more applicable on cross-country PPIs than CPIs that the latter may be affected more by domestic factors. Regressions that we use spatial econometric models on a dataset of 25 economies over the period from 2002-2014 show that PPIs are indeed internationally interlinked to a larger degree than CPIs, as spatial effects are stronger in the former than the latter. The result is believed to be helpful in improving the prediction of future movements both in PPIs and international commodity prices. |
| Serial Number | WP1076 |
| Time | 2016-07-15 |
|