PRO-INFLATIONARY SIGNIFICANCE OF ENERGY COMMODITY AND ELECTRICITY PRICES

Abstract

 Aim: The main aim of this article is to evaluate the influence of electricity prices on the overall economic price level. Methods: The research methodology was carefully designed to encompass various analytical tools, including the graphical representation of data, basic statistical analyses, the computation of the Pearson correlation coefficient with consideration of time lags, and the application of the Granger causality test. Re­sults: The outcomes of the study revealed a significant inefficiency within the market mechanism. Contrary to expectations, the anticipated correlation between electricity prices and inflation (PPI and CPI) indices was found to be statistically insignificant. However, among the examined relationships, a strong and noteworthy connection emerged between coal prices and the PPI inflation index, particularly with a distinct two-month lag in this correlation. Conclusions: Drawing conclusions from the analysis, it became evident that while energy commodity prices, such as coal, do not directly translate into electricity prices and subsequently influ­ence inflation, coal prices do emerge as a significant predictor of inflation. This observation suggests a gap in the intermediate stage of the production cycle, shedding light on a pronounced market inefficiency. The significance of these findings extends beyond the narrow scope of the energy sector. They provide a broader perspective on pricing relationships in the economy, highlighting the limited impact of the market price of electricity on shaping the overall price level. This nuanced understanding constitutes a noteworthy and valuable contribution to the field of economic research, emphasizing the multifaceted dynamics that underlie pricing mechanisms in a complex economic system.