Volume 16, Issue 1 (2016)                   QJER 2016, 16(1): 141-164 | Back to browse issues page

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Motahari M, Lotfalipour M R, Matin S. Investigating the Causal Relationship between Producer Price Index and Consumer Price Index for the Economy of Iran. QJER 2016; 16 (1) :141-164
URL: http://ecor.modares.ac.ir/article-18-10710-en.html
1- Ph.D. Candidate in Economics, Ferdowsi University of Mashhad
2- Professor of Economics, Ferdowsi University of Mashhad
3- M.A Student of Economics, Ferdowsi University of Mashhad
Abstract:   (9079 Views)
Understanding the nature of the causal relationship among economic variables is crucial for the economic policy-makers and planners. So, this study investigates Granger causality between producer price index (PPI) and consumer price index (CPI) for the economy of Iran. From a policy-making point of view, the findings of the study may inform economic policy-makers in pursuing effective anti-inflationary policies. To this end, monthly data are used over the period 1990- 2011. The results of the cointegration test indicate that there is a long-run equilibrium relationship between these variables. According to Hsiao test, there is bi-directional causality between consumer price index (CPI) and producer price index (PPI) in both short-run and long-run. Toda and Yamamoto test also indicate the bi-directional causal relationship between the variables. However, it seems that causality from PPI to CPI is stronger than that from CPI to PPI, supporting the Cushing and McGarvey (1990) hypothesis.
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Article Type: Research Paper | Subject: C01 - Econometrics|E31 - Price Level; Inflation; Deflation|A1 - General Economics
Received: 2013/10/13 | Accepted: 2014/11/12 | Published: 2016/05/21

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