On the dynamic commodity price pass-through effect to CPI constituents

Abstract This paper analyzes the price pass-through effect of the most heavily traded commodities to CPI constituents. We reveal the differences between EU CPI and US CPI constituent dependency on commodity prices, and investigate the dynamics of the price pass-through effect. Our major finding is that due to globalization the US exhibits a high degree of de-industrialization indicated by a break down of the commodity price pass-through effect, while European consumer prices still exhibit a significant exposure to commodity price fluctuations.