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Measuring core inflation in Italy comparing aggregate vs. disaggregate price data

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Author Info

  • Giacomo Sbrana

    ()
    (Université de Strasbourg, Bureau d’Économie Théorique et Appliquée (BETA), 61 Avenue de la Forêt Noire, 67085 Strasbourg Cedex, France)

  • Andrea Silvestrini

    ()
    (Economics, Research and International Relations, Economic and Financial Statistics Department, Bank of Italy, Via Nazionale, 91, 00184 Roma, Italy)

Abstract

This paper focuses on the core inflation measurement in Italy using univariate (national-level inflation) vs. multivariate (city-level inflation) models during the period 1970–2006. We derive algebraic expressions that allow comparison between the reduced form parameters of univariate and multivariate local level models in the context of contemporaneous and temporal aggregation. We illustrate the relevance of these theoretical results for the empirical analysis of time series. Using Italian data, we find that multivariate and univariate models extract similar core inflation measures when analyzing the moderate-low inflation period. In contrast, the two competing models yield different trends when modeling the Great Inflation period.

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File URL: http://dx.doi.org/10.1007/s11698-010-0059-7
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Bibliographic Info

Article provided by Association Française de Cliométrie (AFC) in its journal Cliometrica, Journal of Historical Economics and Econometric History.

Volume (Year): 5 (2011)
Issue (Month): 3 (October)
Pages: 239-258

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Handle: RePEc:afc:cliome:v:5:y:2011:i:3:p:239-258

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Web page: http://www.cliometrie.org
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Related research

Keywords: Unobserved components; Seemingly unrelated time series equations; Local level models; ARIMA;

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