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Long-Term Linear Trends In Consumer Price Indices

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  • Ivan O. Kitov
  • Oleg I. Kitov

Abstract

Headline CPI, core CPI and indices for various expenditure categories were analyzed. Long-term linear trends have been found in the difference between the core CPI and the headline CPI in the USA. Duration of these periods is different for positive (18 years) and negative (8 years) trends, and the trends change to opposite during some shorter time intervals of 2 to 4 years. The difference between the core CPI and the index for energy is similar to that between the core CPI and headline CPI. The index for energy will reach the core CPI in 2008, however. Then, one should not expect further increase in energy price beyond that dictated by the CPI. It is likely that oil price will be falling in absolute terms. The difference between the core CPI and the index for food also has two linear branches after 1980, but the slope of the current trend is weak and the difference will intercept zero line only in 2014. The difference between the core CPI and the housing index is characterized by an almost constant duration of negative and positive branches � approximately 11 years. The current period of negative slope in the difference will approach its turning point in 2008 or 2009 and is characterized by very high volatility. The next trend has to be positive, i.e. the housing index will be growing at a lower rate than the headlining CPI. The difference for the transportation index had a longer period of positive slope � between 1980 and 2004. During this period the difference reached the level of 30 units of index. Currently, a turning period is observed and a negative slope is developing. The difference related to price indices allows to accurately predicting the evolution of relevant stock market indices.

Suggested Citation

  • Ivan O. Kitov & Oleg I. Kitov, 2008. "Long-Term Linear Trends In Consumer Price Indices," Journal of Applied Economic Sciences, Spiru Haret University, Faculty of Financial Management and Accounting Craiova, vol. 3(2(4)_Summ).
  • Handle: RePEc:ush:jaessh:v:3:y:2008:i:2(4)_summer2008:23
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    References listed on IDEAS

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    1. Stephen G. Cecchetti & Rita S. Chu & Charles Steindel, 2000. "The unreliability of inflation indicators," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 6(Apr).
    2. Andrew Bauer & Nicholas Haltom & William B. Peterman, 2004. "Examining contributions to core consumer inflation measures," FRB Atlanta Working Paper 2004-7, Federal Reserve Bank of Atlanta.
    3. Todd E. Clark, 2001. "Comparing measures of core inflation," Economic Review, Federal Reserve Bank of Kansas City, issue Q II, pages 5-31.
    4. Kitov, Ivan & Kitov, Oleg & Dolinskaya, Svetlana, 2007. "Inflation as a function of labor force change rate: cointegration test for the USA," MPRA Paper 2734, University Library of Munich, Germany.
    5. Michael F. Bryan & Stephen G. Cecchetti, 1994. "Measuring Core Inflation," NBER Chapters,in: Monetary Policy, pages 195-219 National Bureau of Economic Research, Inc.
    6. Kitov, Ivan & Kitov, Oleg & Dolinskaya, Svetlana, 2007. "Relationship between inflation, unemployment and labor force change rate in France: cointegration test," MPRA Paper 2736, University Library of Munich, Germany.
    7. Kitov, Ivan, 2007. "Exact prediction of inflation and unemployment in Japan," MPRA Paper 5464, University Library of Munich, Germany.
    8. Kitov, Ivan, 2007. "Exact prediction of inflation and unemployment in Germany," MPRA Paper 5088, University Library of Munich, Germany.
    9. Kitov, Ivan, 2007. "Exact prediction of inflation and unemployment in Canada," MPRA Paper 5015, University Library of Munich, Germany.
    10. Ivan, Kitov, 2006. "Exact prediction of inflation in the USA," MPRA Paper 2735, University Library of Munich, Germany.
    11. Mark A. Wynne, 2008. "Core inflation: a review of some conceptual issues," Review, Federal Reserve Bank of St. Louis, issue May, pages 205-228.
    12. James Dolmas, 2005. "Trimmed mean PCE inflation," Working Papers 0506, Federal Reserve Bank of Dallas.
    13. Robert W. Rich & Charles Steindel, 2005. "A review of core inflation and an evaluation of its measures," Staff Reports 236, Federal Reserve Bank of New York.
    14. Smith, Julie K, 2004. "Weighted Median Inflation: Is This Core Inflation?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 36(2), pages 253-263, April.
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    Citations

    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. The price of steel and iron will be falling, but not long
      by Ivan Kitov in Economics as Classical Mechanics on 2016-05-19 22:00:00
    2. The fall in energy and food prices will be long and deep
      by Ivan Kitov in Economics as Classical Mechanics on 2016-05-17 00:22:00
    3. Food will be getting cheaper during the next decade
      by Ivan Kitov in Economics as Classical Mechanics on 2016-12-25 19:30:00

    Citations

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    Cited by:

    1. Kitov, Ivan, 2010. "Modeling share prices of banks and bankrupts," MPRA Paper 21369, University Library of Munich, Germany.
    2. Kitov, Ivan, 2009. "ConocoPhillips and Exxon Mobil stock price," MPRA Paper 15334, University Library of Munich, Germany.
    3. Kitov, Ivan & Kitov, Oleg, 2009. "Predicting share price of energy companies: June-September 2009," MPRA Paper 15863, University Library of Munich, Germany.
    4. Kitov, Ivan, 2012. "ConocoPhillips’ share price model revisited," MPRA Paper 38261, University Library of Munich, Germany.
    5. Kitov, Ivan, 2009. "Predicting the price index for jewelry and jewelry products: 2009 to 2016," MPRA Paper 15875, University Library of Munich, Germany.
    6. Kitov, Ivan, 2014. "A two-year revision: cross comparison and modeling of Goldman Sachs, Morgan Stanley, JPMorgan Chase, Bank of America, and Franklin Resources," MPRA Paper 54696, University Library of Munich, Germany.
    7. Ivan O. KITOV & Oleg I. KITOV & Svetlana A. DOLINSKAYA, 2008. "Comprehensive Macro Ï¿½ Model For The Us Economy," Journal of Applied Economic Sciences, Spiru Haret University, Faculty of Financial Management and Accounting Craiova, vol. 3(4(6)_Wint).
    8. Ivan Kitov, 2012. "Cross comparison and modelling of Goldman Sachs, Morgan Stanley, JPMorgan Chase, Bank of America, and Franklin Resources," Papers 1212.1661, arXiv.org.
    9. Kitov, Ivan & Kitov, Oleg, 2009. "PPI of durable and nondurable goods: 1985-2016," MPRA Paper 15874, University Library of Munich, Germany.
    10. Ivan O. Kitov & Oleg I. Kitov, 2010. "Crude oil and motor fuel: Fair price revisited," Papers 1005.0051, arXiv.org.
    11. Kitov, Ivan & Kitov, Oleg, 2009. "Sustainable trends in producer price indices," MPRA Paper 15194, University Library of Munich, Germany.
    12. Kitov, Ivan & Kitov, Oleg, 2012. "Sustainable trends and periodicity in consumer price indices indicate that the era of low energy prices is approaching," MPRA Paper 43392, University Library of Munich, Germany.
    13. Kitov, Ivan, 2009. "What is the best firm size to invest?," MPRA Paper 13721, University Library of Munich, Germany.
    14. Kitov, Ivan, 2009. "Predicting gold ores price," MPRA Paper 15873, University Library of Munich, Germany.
    15. Kitov, Ivan & Kitov, Oleg, 2009. "A fair price for motor fuel in the United States," MPRA Paper 15039, University Library of Munich, Germany.
    16. Kitov, Ivan & Kitov, Oleg & Dolinskaya, Svetlana, 2008. "Comprehensive macro-model for the U.S. economy," MPRA Paper 9808, University Library of Munich, Germany.
    17. Kitov, Ivan & Kitov, Oleg, 2009. "Modelling of selected S&P 500 share prices," MPRA Paper 15862, University Library of Munich, Germany.
    18. Kitov, Ivan, 2015. "Modeling the price of crude oil and motor fuel: a five-year revision," MPRA Paper 62338, University Library of Munich, Germany.

    More about this item

    Keywords

    CPI; core CPI; expenditure categories; price index; stock market index;

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets

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