Research

Feedback between Wholesale and Consumer Price Inflation: A Reexamination of the Evidence

Previous studies interpret the unidirectional Granger causality from wholesale to consumer prices as evidence that final goods prices respond to exogenous cost-push factors in the primary goods sector. This paper presents a simple model that demonstrates this Granger causal pattern is also consistent with perfectly flexible prices and strong demand elements. Using the recursive structure of this model as a maintained hypothesis in estimation, the authors find negligible permanent feedback from wholesale price shocks to consumer price inflation. Instead, the evidence supports a monetary explanation of both wholesale and consumer price inflation in the long run.

Publication Information
Article Title: Feedback between Wholesale and Consumer Price Inflation: A Reexamination of the Evidence
Journal: Southern Economic Journal (Apr, 1990)
v. 56, iss. 4, pp. 1059-1072
Author(s): Cushing, Matthew J;  McGarvey, Mary G
Researcher Information
    
Cushing, Matthew J
Cushing, Matthew J
Professor of Economics
Expertise:
  • Labor Economics
  • Econometrics
  • Macroeconomics
Economics
CoB 525 U
P.O. Box 880489
University of Nebraska-Lincoln
Lincoln, NE 68588-0489, USA
Phone: (402) 472-2323
Fax: (402) 472-9700
mcushing1@unl.edu
McGarvey, Mary G
McGarvey, Mary G
Associate Professor of Economics
Expertise:
  • Applied Econometrics
  • Public Policy Analysis
  • Economics of Obesity
  • Labor Markets
Economics
CoB 525 P
P.O. Box 880489
University of Nebraska-Lincoln
Lincoln, NE 68588-0489, USA
Phone: (402) 472-9415
mmcgarvey1@unl.edu