Sectoral consumer price synchronization: evidence from an emerging ASEAN economy

Abstract

This paper assesses spillover effects across ten sectoral consumer price indices, weighted components of the CPIbasket, of an emerging ASEAN economy, Vietnam. The findings show a high degree of total connectedness acrosssectors. Some essential goods and services such as food and beverages, clothing and footwear, housing and utilitiesexhibit more central roles within the directional price graph. Besides, the time-varying spillover index announcesseveral volatility spikes that correspond to economic turmoil, especially in the current COVID-19 pandemic. Methodological contribution suggests that one should not overlook the cointegration order regarding disaggregatedconsumer price indices. Robustness analysis by varying the normalization rules and estimating a TVP-VAR modelagrees with the main conclusions.