Dr. Corey Williams, assistant professor of economics, published new research on the relationship between producer and consumer prices. His study, titled “Which Producer Prices Lead Consumer Prices?” published in Empirical Economics, reviewed how fluctuations in producer prices, specifically those that are disaggregated (broken down into smaller groups to reveal more specific findings) by commodity type, impact consumer price inflation.
Williams focuses on supply dynamics and inflation, which he believes traditional models fall short on. “Producer price inflation fundamentally captures the pains that firms endure along the production chain,” Williams explained.
There were a few motivations behind his research. “The first major piece of motivation stems back to my undergraduate education in supply chain management and my work experience in the field.” While working on a previous empirical paper, Williams discovered plenty of research on commodity and industry levels but saw there was a lack of research on how disaggregated data influences how inflation is interpreted. Therefore, Williams extended his original research by breaking down the main components of producer price inflation.
In his study, Williams found there was a major difference between aggregate (broad data that provides a broad perspective of the economy) and disaggregated produce prices. He found that certain commodities, such as rubber, leather and plastics showed a one-way relationship where they could predict future consumer prices. This finding challenges the belief that aggregate producer prices always lead to consumer price increases.
If we are interested in tracking the degree to which producer price pains bubble up to consumer prices, it would be better to pay more attention to the producer prices of these commodities rather than the aggregate producer price series on its own,” Williams suggested.
Another interesting finding from the study is the role of cause-and-effect relationships in predicting inflation. While the majority of studies have found a one-way relationship between producer and consumer prices, Williams and his research showed that when it comes to disaggregated data, some commodities had a more direct impact on consumer prices than aggregate data indicated. This finding has the potential to reshape how policymakers and economists think about inflation and how to best predict how it fluctuates.
Williams is confident that his findings can inform future inflation predictions. “Empirically, I think the greatest contribution this paper makes is informing policymakers, practitioners and other researchers that there is value in utilizing these disaggregated producer price inflation series to better predict or forecast consumer price inflation,” he explained. Williams noted that his research leaves a lot of space to dive into the deeper question of why certain commodities influence inflation in this way. He hopes that future researchers will look at his findings and explore the deeper implications.
In addition to promoting his research findings, Williams also highlighted the potential of Shippensburg University’s economics program.”I think it’s a high-quality program. While we are a small major, I feel as though we see consistently high potential and ambitious students that always impress me. The faculty members in our department are truly best-in-class as far as pedagogy is concerned.”
Williams also recognized The Economics Club at Ship, which restarted a year ago and has had success in organizing guest lectures. The econ club also sent a student to compete in the Undergraduate Paper Contest at the annual Pennsylvania Economics Association meeting. The club plans to continue to send students to compete in the future.
Moving forward, Williams is excited to continue researching the relationship between producer and consumer prices. His study on disaggregated producer price inflation is one of the many examples of how his research has the potential to change the way economists approach inflation predictions and leave an impact on economic policies.
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