Monetary Policy and Food Inflation in Central Europe: Evidence from the Visegrad Countries

Abstract

This study examines the relationship between monetary policy and food inflation in the Visegrad Group, using monthly data and applying both OLS and quantile regression methods. Because the model is estimated in first differences and includes a three-month lag of the policy rate, all results reflect short-run month-to-month dynamics of food inflation. The analysis reveals that the monetary policy rate is significantly associated with food inflation across several quantiles, with stronger effects observed during periods of higher inflation. The study also examines the roles of exchange rates, industrial and transport inflation, with a robustness check replacing transport inflation with energy prices. This adjustment confirmed the relevance of energy prices in food inflation dynamics. The results indicate that while monetary policy does affect food prices, its effectiveness depends on the level of inflation and underlying supply-side factors. Quantile regression proves to be a valuable tool in capturing these heterogeneities. These findings can support policymakers in designing more responsive and effective strategies to manage food inflation under varying economic conditions.