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Purpose The nexus of commodity prices with inflation is one of the main concerns for a nation's economy like India. The literature does not have enough volatility-based study, especially using the multivariate GRACH family of models to find a link between these two. It is the main reason for the conduct of this study. This paper aims to estimate the volatility effects of commodity prices on inflation. Design/methodology/approach For ten years (2011–2022), future prices of selected seven agriculture commodities and inflation indices (wholesale price index WPI and consumer price index CPI) are gathered every month. BEKK GARCH model (BGM) and DCC GARCH model (DGM) are employed to determine the volatility effect of commodity prices (CPs) on inflation. Findings The authors find that volatility's short-term (shock) impact on agricultural CPs to inflation does not exist. However, the long-term volatility spillover effect (VSE) is significant from commodities to inflation. Practical implications The study's findings have a significant implication for the policymakers to take a long-term view on inflation management regarding commodity prices. The findings can facilitate policy on the choice of commodities and the flexibility of their trading on the commodities derivatives market. Originality/value The findings of the study are unique. The authors do not observe any study on the volatility effect of agri-commodities (agricultural commodities) prices on inflation in India. This paper applies advanced techniques to provide novel and reliable evidence. Hence, this research is believed to contribute significantly to the knowledge body through its novel evidence and advanced approach.
Rastogi et al. (Tue,) studied this question.