Causality Analysis of Producer Price Index (PPI) and Consumer Price Index (CPI) in Indonesia
This study aims to investigate the relationship between PPI inflation and CPI inflation in Indonesia both in general and for each group of commodity, and to identify whether PPI inflation can be a leading indicator for CPI inflation or vice versa. This study employs Granger causality based on VAR model for monthly data series from January 2010 until August 2016. The results show that there are unidirectional relationship between PPI inflation and CPI inflation generally, bidirectional relationship from PPI inflation to CPI inflation for foodstuffs group, unidirectional from CPI inflation to PPI inflation for clothing group, and no causality between PPI inflation and CPI inflation for processed food, beverage, cigarette, and tobacco group.
Keywords: Granger causality, producer price index, consumer price index, VAR
JEL classification: E31, C22
Akcay S. 2011. The Causal Relationship between Producer Price Index and Consumer Price Index: Empirical Evidence from Selected European Countries. International Journal of Economics and Finance, Vol. 3, No.6; November 2011, www.ccsenet.org/ijef
[BPS] Badan Pusat Statistik. 2015. Panduan Teknis Survei Harga Produsen Tahun 2015. Jakarta (ID) : BPS.
Blomberg SB, Harris ES. 1995. The Commodity - Consumer Price Connection: Fact or Fable. Federal Reserve Bank of New York Economic Policy Review, v. 1 n. 3.
Caporale GM, Katsimi M, Pittis N. 2002. Causality links between consumer and producer prices: Some empirical evidences. Southern Economic Journal. 68, 703–711.
Chowdury A. 2014. Inflation and inflationuncertainty in India: the policy implications of the relationship. Department of Economics, Marquette University, Milwaukee, Wisconsin, USA Journal of Economic Studies. Vol. 41 No. 1, 2014
Clark T. 1995. Do Producer Prices Lead Consumer Prices?. Federal Reserve Bank of Kansas City Economic Review. Vol. 80, pp. 25-39.
Colclough WG, Lange MD. 1982. Empirical evidence of causality from consumer to wholesale prices. Journal of Econometrics, 19, 379– 384.
Cushing MJ, McGarvey MG. 1990. Feedback between wholesale and consumer price inflation: A reexamination of the evidence. Southern Economic Journal, 56, 1059–1072.
Enders W. 2004. Applied Econometrics Time Series, Second edition, John Wiley & Sony Inc.
Galodikwe IK. 2014. Exploring the Relationship Between Producer Price Index and Consumer Price Index in South Africa [Dissertation]. North West University.
Ghazali MF, Yee OA, Zulkifli MM. (2008). Do Producer Prices Cause Consumer Prices? Some Empirical Evidence. International Journal of Business and Management, 3, 11, 78-82.
Gujarati DN, Porter D. 2009. Basic Econometrics, Fifth edition. McGraw Hill International
Jones JD. 1986. Consumer Prices, Wholesale Prices, and Causality (More Empirical Evidence for the U.S., 1947-198). Empirical Economics, vol. 11, issue 1, pp. 41- 55.
Manik RES, Hidayat P. 2010. Analisis Kausalitas Antara Pengeluaran Pemerintah dan Pertumbuhan Ekonomi Sumatera Utara. Jurnal Keuangan dan Bisnis Vol.2 No.1 Maret, 2010.
Mankiw N Gregory. 2006. Makroekonomi. Edisi ke-6. Jakarta (ID): Erlangga
Shahbaz M, Tiwari AK, Tahir MI. 2012. Does CPI Granger-Cause WPI?, New Extensions from Frequency Domain Approach in Pakistan, COMSATS Institude of Information Technology, Lahore, Pakistan, ICF AI University, Tripura, GIFT University, Pakistan
Sidaoui JCC, Chiquiar D, Ramos MF. 2009. A note on the predictive content of PPI over CPI inflation: The case of Mexico. Working Paper 2009–14, Banco de Mexico.
Ulke V, Ergun U. 2014. The Relationship between Consumer Price and Producer Price Indices in Turkey. International Journal of Academic Research in Economics and Management Sciences January 2014, Vol. 3, No. 1 ISSN: 2226- 3624, JEL Classification: C32, E31
Utari GAD, et al. 2015. Inflasi di Indonesia Karakteristik dan Pengendaliannya, Seri Kebanksentralan No.23, Bank Indonesia.
Widarjono A. 2016. Ekonometrika Pengantar dan Aplikasinya Disertai Panduan Eviews Edisi Keempat. Yogyakarta : UPP STIM YKPN.
Yin WK, Xuan JL. 2013. Threshold Cointegration and Causality between CPI and PPiin Selected Countries-Some International Evidence. Working Paper Series August 2013, Department of Economics and Finance Hong Kong Shue Yan University 48
Wulandari H. 2007. Peranan Volatilitas Nilai Tukar dan Indeks Saham Amerika Serikat dan Jepang terhadap Indeks Saham di ASEAN5 [Skripsi]. Jakarta (ID) : Sekolah Tinggi Ilmu Statistik.
The authors who publis article(s) in Jurnal Ekonomi and Kebijakan Pembangunan have to understand and agree that the copyright of article published is owned by Jurnal ekonomi and Kebijakan pembangunan including to reproduce, distribute and sell this journal to public.