Inflation by Producer Price Index – predictive factor for Inflation by Consumer Price Index? The case of Romania

Assessment of the Consumer Price Index in time is one of the most used methods for the analysis of inflation, which population have it and perceive with ease about the evolution of prices of goods and services from the consumption basket. According to the theory of the production chain, part of the inflation through Production Price Indices could be transmitted to inflation through Consumer Price Indices, given that consumer prices are calculated based on the prices of production. This is the start hypothesis for the case study undertaken. The material explores the relationship between inflation through producer prices and inflation through consumer prices in our country. The analysis will be applied to monthly data series in the period 2007-2013 in Romania. The aim of the research is to verify in what degree inflation by producer prices can be a predictive factor for inflation by consumer price in the analyzed period. After analyzing the relationship between Consumer Price inflation and Producer Price inflation through statistical and econometric methods (Johansen test, Engle-Granger test and Granger Causality) wasn’t identified any long-term equilibrium relationship between time series analysed.