Decomposing time-frequency relationship between producer price and consumer price indices in Romania through wavelet analysis

This study analyses Granger-causality between the return series of CPI and PPI (i.e., inflation measured by CPI and PPI) for Romania, by using monthly data covering the period of 1991m1 to 2011m11. To analyse the issue in depth, this study decomposes the time-frequency relationship between CPI- and PPI-based inflation through a continuous wavelet approach. Our results provide strong evidence that there are cyclical effects from variables (as variables are observed in phase), while anti-cyclical effects are not observed.

► We examine the relationship between PPI and CPI in Romania. ► We use the wavelet analysis method. ► Cyclical effects from each other considered variables are found. ► Any anti-cyclical effects are not observed.