RELATIONSHIP BETWEEN PRODUCER PRICES AND CONSUMER INFLATION IN BULGARIA
Author: Lachezar Borisov (VUZF Sofia)
Keywords: producer price index, consumer price index, inflation, forecasting
The study aims to find relationships between the harmonized consumer price index and the total producer price index in Bulgaria. Through the analysis, it aims to reveal the possibility of using the producer price index to predict the dynamics of consumer inflation in the country. The economic crisis triggered by the Covid-19 pandemic found a very strong reflection in the rise of consumer prices and producer prices in 2021, which makes it necessary to explore different tools to predict and investigate dependencies that lead to price increases. With inflation soaring, the speed with which information is obtained on the direction of price indices is also important, as they have a direct bearing on consumer welfare. The study concludes that there is a causal relationship between the total producer price index and the harmonized consumer price index. The relationship is strongest and the overall producer price index has the largest impact on the consumer price index with a lag of 5 months. This makes it possible to forecast consumer inflation through producer price dynamics in industry.
