E0212: Inflation Pass-Through Diagnostic Framework

Quality / Updated / COI

Quality

Reviewed

Updated

02/14/2026

Source

Citations & Trust

COI

none

TL;DR

Inflation Pass-Through Diagnostic Framework maps core CPI, wage growth, and import share and sector price indices, unit labor cost, and exchange rate so teams can decide on estimating price pass through from input shocks while documenting the price stability vs output support. It turns implicit judgment into an explicit decision record. It is intended for quarterly planning, aligning key inputs and setting decision criteria while producing the recommendation.

Applicability

Apply this framework when estimating price pass through from input shocks creates disputes about core CPI, wage growth, and import share and the reliability of sector price indices, unit labor cost, and exchange rate. It forces a single view of the price stability vs output support, clarifies decision rights, and creates a repeatable process for updates when conditions change.

Steps

1. Define scope and horizon, then lock metric definitions for core CPI, wage growth, and import share so comparisons are consistent.
2. Collect sector price indices, unit labor cost, and exchange rate and normalize units, timing, and ownership; document data quality gaps.
3. Run scenarios to see where price stability vs output support flips; record thresholds and triggers.
4. Select a preferred option, note constraints and approvals, and capture decision criteria.
5. Set monitoring cadence and review triggers tied to changes in core CPI, wage growth, and import share and sector price indices, unit labor cost, and exchange rate.

Template

Template: Objective; Scope and horizon; Success metrics (core CPI, wage growth, and import share); Key inputs and assumptions (sector price indices, unit labor cost, and exchange rate); Options A/B/C; Scenario ranges; Tradeoff summary (price stability vs output support); Risks and mitigations; Decision criteria; Recommendation; Owner and timeline; Review triggers; Evidence log and data refresh plan.

Pitfalls

• Misconception: treating core CPI, wage growth, and import share as sufficient without validating sector price indices, unit labor cost, and exchange rate creates false confidence.
• Overweighting one side of price stability vs output support leads to decisions that unravel when conditions shift.
• Stale or unowned data sources will fail governance checks and force rework during audits.

Case

Case: In a central bank team, leaders debated estimating price pass through from input shocks but had conflicting views of core CPI, wage growth, and import share. They used the framework to align sector price indices, unit labor cost, and exchange rate, quantified where price stability vs output support flipped, and documented the trigger. The resulting decision log clarified accountability, reduced escalation time, and prevented repeated debates in the next planning cycle. During quarterly planning, leaders aligned key inputs, set decision criteria, and issued the recommendation.

Citations & Trust

• The Economy (CORE Econ)
• Principles of Economics 3e (OpenStax)