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The Persistence of Inflation in Switzerland: Evidence from Disaggregate Data

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Author Info
Simone Elmer () (KOF Swiss Economic Institute, ETH Zurich, Switzerland)
Thomas Maag () (KOF Swiss Economic Institute, ETH Zurich, Switzerland)

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Abstract

This paper investigates persistence of Swiss consumer price inflation using aggregate and disaggregate inflation data covering 1983{2008. We document that persistence of sectoral inflation rates is below persistence of aggregate inflation. Our main finding is that inflation persistence significantly declines in the early 1990s. An estimated factor model reveals that inflation persistence stems from a persistent component that is common to inflation rates across sectors. Both the relevance and the persistence of the common component decline in the 1990s. Depending on the sample period and aggregation level, 70 to 90 percent of the variance in sectoral inflation rates is accounted for by short-lived sectoral factors.

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Publisher Info
Paper provided by KOF Swiss Economic Institute, ETH Zurich in its series KOF Working papers with number 09-235.

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Length: 46 pages
Date of creation: Jul 2009
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Handle: RePEc:kof:wpskof:09-235

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Related research
Keywords: inflation persistence; inflation dynamics; relative price variability; factor model;

Find related papers by JEL classification:
E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions

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