IS CURRENT INFLATION A DEMAND-PULL OR A COST-PUSH?

Authors

  • Deergha Raj Adhikari Professor, University of Louisiana at Lafayette
  • S.P. Uma Rao Professor, University of Louisiana at Lafayette
  • Denis Boudreaux Associate Professor, University of Louisiana at Lafayette

DOI:

https://doi.org/10.58885/ijbe.v10i1.9.da

Keywords:

demand-pull inflation, ost-push inflation, ARDL model, Threshold model.

Abstract

The correct identification of the type of inflation is very important from a policy perspective. This is because misidentification of the type of inflation leads to an incorrect policy action thereby hurting the economy as opposed to helping it. In this study, we applied both the ARDL model and the Threshold model. While the finding from the ARDL model fails to establish any long-run causal relationship among the model variables, INF, CPI, and PPI, the Threshold model, however, finds that, in both regimes of CPI and PPI, CPI has a negative and statistically significant impact, whereas PPI has a positive and statistically significant impact on the inflation rate. So, our conclusion is that the current US inflation is cost-push rather than demand-pull. Therefore, interest rate hikes by the Federal Reserve won’t ease current inflation rather worsen it.

JEL Classification: E31, E52

References

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Hussain, Amir and Obaid, Zia. 2013. “Cost-push vs Demand-pull Inflation: Evidence from an Emerging Economy,” Journal of Humanities & Social Sciences, vol. 21, issue 2. August.

Shaikh, Ehsan A., Siddiqui, A. H., and Wisarat, S. 2014. “An Investigation of Nature and Causes of Inflation in Pakistan,” Journal of Emerging Issues in Economics, Finance and Banking, vol. 3, issue 5.

Zhang, Xiaojing. 2012. “China’s Inflation: Demand-Pull or Cost-Push? Asian Economic Papers, vol. 11, issue 3, October.

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Published

2025-03-02 — Updated on 2025-03-18

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How to Cite

Deergha Raj Adhikari, S.P. Uma Rao, & Denis Boudreaux. (2025). IS CURRENT INFLATION A DEMAND-PULL OR A COST-PUSH?. International Journal of Business & Economics (IJBE), 10(1), 9–19. https://doi.org/10.58885/ijbe.v10i1.9.da (Original work published March 2, 2025)

Issue

Vol. 10 No. 1 (2025): International Journal of Business & Economics (IJBE)

Section

Articles

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