BAKU, Azerbaijan, September 3. An index
tracking imported food prices in Azerbaijan can provide signals on
the formation of food inflation in the country approximately two
months in advance.


The findings are outlined in a study titled “Construction and
Forecasting of the Imported Food Price Index in Azerbaijan”
prepared by Central Bank of Azerbaijan (CBA) employees Temkin
Nuriyev, Aygun Garayeva and Gulzar Tahirova.


As part of the study, the researchers developed the Imported
Food Price Index (IFPI) to more accurately monitor price changes
for imported food products in Azerbaijan. The index covers the
period from January 2018 to February 2026 and was based on data
from around 800,000 customs transactions selected from
approximately 16 million raw import records.


The new index was developed taking into account the structure of
the consumer basket and includes 34 major product categories and 44
product types with a high degree of import dependence. According to
the authors, this approach helps reduce the aggregation problem
that may arise in traditional import price indicators calculated
across broad product groups and allows for a more accurate
assessment of how external price changes affect domestic food
prices.


One of the key findings of the study is that the relationship
between the IFPI and the official food consumer price index (CPI)
has a leading time pattern. According to calculations, the
correlation coefficient between the two indicators reaches 0.81
with a two-month lag. This indicates that changes in imported food
prices can provide advance signals about future food price dynamics
in Azerbaijan.


“Another important advantage of this indicator is related to
data availability. Customs data becomes available on average 20–25
days after the reference month. Meanwhile, food CPI data from the
State Statistics Committee is usually published 10–15 days after
the end of the month. As a result, once the IFPI for a given month
becomes available, it can provide an information advantage of
approximately 6–7 weeks compared with the release of the official
food CPI indicator for the following period,” the study said.







The research also developed a machine learning-based approach to
forecasting imported food prices. The authors noted that this
approach produced more accurate forecasting results compared with
traditional linear models.


According to the study, global changes in food, energy and
fertilizer prices also have a significant impact on imported food
price dynamics. The correlation between the IFPI and the FAO Food
Price Index stands at 0.70, while the correlation with fertilizer
prices is 0.66 and with natural gas prices is 0.62.


The authors noted that food products account for approximately
43% of Azerbaijan’s consumer basket. Therefore, more accurate and
timely monitoring of external price shocks is important for
forecasting food inflation and broader inflation trends.


The study states that the developed index and its forecasts can
be integrated into the CBA’s models for more detailed food
inflation projections. This approach could help identify food price
trends at an earlier stage and improve the accuracy of overall
inflation forecasts.


According to the researchers, in economies with high import
dependence, it is important not only to monitor international price
indicators but also to develop more detailed measures reflecting
how external price shocks are transmitted to domestic prices
through specific products and the consumer basket.