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Estimating the common trend rate of inflation for consumer prices and consumer prices excluding food and energy prices

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Author Info
Michael T. Kiley

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Abstract

I examine the common trend in inflation for consumer prices and consumer prices excluding prices of food and energy. Both the personal consumption expenditure (PCE) indexes and the consumer price indexes (CPI) are examined. The statistical model employed is a bivariate integrated moving average process; this model extends a univariate model that fits the data on inflation very well. The bivariate model forecasts as well as the univariate models. The results suggest that the relationship between overall consumer prices, consumer prices excluding the prices of food and energy, and the common trend has changed significantly over time. In the 1970s and early 1980s, movements in overall prices and prices excluding food and energy prices both contained information about the trend; in recent data, the trend is best gauged by focusing solely on prices excluding food and energy prices.

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Paper provided by Board of Governors of the Federal Reserve System (U.S.) in its series Finance and Economics Discussion Series with number 2008-38.

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Date of creation: 2008
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Handle: RePEc:fip:fedgfe:2008-38

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References listed on IDEAS
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.:
  1. Robert Rich & Charles Steindel, 2005. "A review of core inflation and an evaluation of its measures," Staff Reports 236, Federal Reserve Bank of New York. [Downloadable!]
  2. Cogley, Timothy, 2002. "A Simple Adaptive Measure of Core Inflation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 34(1), pages 94-113, February.
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  3. James H. Stock & Mark W. Watson, 2007. "Why Has U.S. Inflation Become Harder to Forecast?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(s1), pages 3-33, 02. [Downloadable!] (restricted)
  4. Hooker, Mark A, 2002. "Are Oil Shocks Inflationary? Asymmetric and Nonlinear Specifications versus Changes in Regime," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 34(2), pages 540-61, May.
  5. Alan S. Blinder & Ricardo Reis, 2005. "Understanding the Greenspan standard," Proceedings, Federal Reserve Bank of Kansas City, issue Aug, pages 11-96. [Downloadable!]
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Cited by:
(explanations, 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.)

  1. Stefano Eusepi & Bart Hobijn & Andrea Tambalotti, 2009. "CONDI: a cost-of-nominal-distortions index," Working Paper Series 2009-03, Federal Reserve Bank of San Francisco. [Downloadable!]
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  2. Todd E. Clark & Troy Davig, 2008. "An empirical assessment of the relationships among inflation and short- and long-term expectations," Research Working Paper RWP 08-05, Federal Reserve Bank of Kansas City. [Downloadable!]
  3. Stephen G Cecchetti & Richhild Moessner, 2008. "Commodity prices and inflation dynamics," BIS Quarterly Review, Bank for International Settlements, December. [Downloadable!]
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This page was last updated on 2009-11-18.

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