Modeling Producer Price Index and Consumer Price Index Pre and Post Coronavirus Pandemic

Abstract

Consumer Price Index (CPI) and Producer Price Index (PPI) should move together because the cost of inputs is the most important determinant of the selling prices. However, our results, using monthly data from November 2009 to August 2023, show that they do not. At the micro level, to examine whether the increase in gap between PPI and CPI is the result of increase in indirect expenses or increase in profit margin, we limit our analyses to only one industry that is more prone to artificial price increases. The main purpose of our study is to investigate whether the rise in selling prices post the Coronavirus Pandemic period is the increase in input prices or unjustifiable greed. Our results show that companies in our selected industry were enjoying the rise in their revenues and earnings during Coronavirus Pandemic period.