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Examining contributions to core consumer inflation measures

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  • Andrew Bauer
  • Nicholas Haltom
  • William Peterman

Abstract

The purpose of this paper is to examine the composition of inflation over time. The authors calculate the contributions to inflation for individual series of the consumer price index (CPI) and personal consumption expenditures price index (PCEPI) and then aggregate those contributions into major consumer expenditure categories. This technique provides a wealth of information concerning aggregate inflation behavior in a concise way, enabling the authors to describe the composition of inflation at any point in time. A particularly important benefit of this method is that it allows them to distinguish broad-based changes in inflation from changes due to relative price movements of a few components. The authors examine long-term trends in contributions to PCEPI core inflation and make inferences about the direction of inflation in the near term. In addition, they examine the decline in CPI core inflation over the 2002–03 period and find that the decline was largely driven by relative price changes of two components.

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Bibliographic Info

Paper provided by Federal Reserve Bank of Atlanta in its series Working Paper with number 2004-7.

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Date of creation: 2004
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Handle: RePEc:fip:fedawp:2004-7

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  1. Todd E. Clark, 1999. "A comparison of the CPI and the PCE price index," Economic Review, Federal Reserve Bank of Kansas City, issue Q III, pages 15-29.
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Cited by:
  1. Diewert, Erwin & Nakamura, Alice O., 2009. "Accounting for Housing in a CPI," Economics working papers erwin_diewert-2009-19, Vancouver School of Economics, revised 12 Mar 2009.
  2. Diewert, W. Erwin & Nakamura, Alice O. & Nakamura, Leonard I., 2009. "The housing bubble and a new approach to accounting for housing in a CPI," Journal of Housing Economics, Elsevier, vol. 18(3), pages 156-171, September.

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