Indicators of the general price level and inflation
AbstractThis article examines whether price indexes, such as the CPI, the PPI, and the implicit price deflator for GDP (PGDP), tell a consistent story about the general price level and inflation rate. To this end, Zsolt Becsi analyzes the time series properties of these indexes. He finds that the PGDP has a stable long-term relationship with both of the other price indexes. Some evidence suggests that PGDP and CPI inflation have common long-run trends, while PPI inflation has no discernible stable long-run relationship with either PGDP or CPI inflation. ; Some theories suggest that the price level relevant for monetary policy is broader than price indexes of final goods and services such as the PGDP. This article investigates whether the PGDP captures movements in other price or inflation series. There is weak evidence that the PGDP shares common trends with the price levels and inflation rates of some intermediate goods and assets. Overall, these results suggest that PGDP makes a good indicator of the general price level for monetary policy because it reflects shocks to a broad range of other series.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by Federal Reserve Bank of Dallas in its journal Economic and Financial Policy Review.
Volume (Year): (1994)
Issue (Month): Q IV ()
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Bennett T. McCallum, 1993.
"Unit roots in macroeconomic time series: some critical issues,"
Federal Reserve Bank of Richmond, issue Spr, pages 13-44.
- Bennett T. McCallum, 1993. "Unit Roots in Macroeconomic Time Series: Some Critical Issues," NBER Working Papers 4368, National Bureau of Economic Research, Inc.
- Gonzalo, Jesus, 1994. "Five alternative methods of estimating long-run equilibrium relationships," Journal of Econometrics, Elsevier, vol. 60(1-2), pages 203-233.
- Santoni, G J & Moehring, H Brian, 1994. "Asset Returns and Measured Inflation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 26(2), pages 232-48, May.
- Johansen, Soren, 1991. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica, Econometric Society, vol. 59(6), pages 1551-80, November.
- John Y. Campbell & Pierre Perron, 1991.
"Pitfalls and Opportunities: What Macroeconomists Should Know About Unit Roots,"
in: NBER Macroeconomics Annual 1991, Volume 6, pages 141-220
National Bureau of Economic Research, Inc.
- Campbell, J.Y. & Perron, P., 1991. "Pitfalls and Opportunities: What Macroeconomics should know about unit roots," Papers 360, Princeton, Department of Economics - Econometric Research Program.
- John Y. Campbell & Pierre Perron, 1991. "Pitfalls and Opportunities: What Macroeconomists Should Know About Unit Roots," NBER Technical Working Papers 0100, National Bureau of Economic Research, Inc.
- Campbell, John & Perron, Pierre, 1991. "Pitfalls and Opportunities: What Macroeconomists Should Know about Unit Roots," Scholarly Articles 3374863, Harvard University Department of Economics.
- Cochrane, John H, 1988. "How Big Is the Random Walk in GNP?," Journal of Political Economy, University of Chicago Press, vol. 96(5), pages 893-920, October.
- Kwiatkowski, Denis & Phillips, Peter C. B. & Schmidt, Peter & Shin, Yongcheol, 1992.
"Testing the null hypothesis of stationarity against the alternative of a unit root : How sure are we that economic time series have a unit root?,"
Journal of Econometrics,
Elsevier, vol. 54(1-3), pages 159-178.
- Denis Kwiatkowski & Peter C.B. Phillips & Peter Schmidt, 1991. "Testing the Null Hypothesis of Stationarity Against the Alternative of a Unit Root: How Sure Are We That Economic Time Series Have a Unit Root?," Cowles Foundation Discussion Papers 979, Cowles Foundation for Research in Economics, Yale University.
- Kwiatkowski, D. & Phillips, P.C.B. & Schmidt, P., 1990. "Testing the Null Hypothesis of Stationarity Against the Alternative of Unit Root : How Sure are we that Economic Time Series have a Unit Root?," Papers 8905, Michigan State - Econometrics and Economic Theory.
- Keith M. Carlson, 1989. "Do price indexes tell us about inflation? A review of the issue," Review, Federal Reserve Bank of St. Louis, issue Nov, pages 12-30.
- Michael F. Bryan & Stephen G. Cecchetti, 1993.
"Measuring Core Inflation,"
NBER Working Papers
4303, National Bureau of Economic Research, Inc.
- John E. Golob, 1993. "Inflation, inflation uncertainty, and relative price variability: a survey," Research Working Paper 93-15, Federal Reserve Bank of Kansas City.
- Nelson, Charles R. & Plosser, Charles I., 1982. "Trends and random walks in macroeconmic time series : Some evidence and implications," Journal of Monetary Economics, Elsevier, vol. 10(2), pages 139-162.
- Schwert, G. William, 1987. "Effects of model specification on tests for unit roots in macroeconomic data," Journal of Monetary Economics, Elsevier, vol. 20(1), pages 73-103, July.
- Peter N. Ireland, 1993. "Price stability under long-run monetary targeting," Economic Quarterly, Federal Reserve Bank of Richmond, issue Win, pages 25-46.
- Claus, I., 1997. "A Measure of Underlying Inflation in the United States," Working Papers 97-20, Bank of Canada.
- Mark A. Wynne, 2008. "How should central banks define price stability?," Globalization and Monetary Policy Institute Working Paper 08, Federal Reserve Bank of Dallas.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Delia Rodriguez).
If references are entirely missing, you can add them using this form.