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What lies beneath: what can disaggregated data tell us about the behaviour of prices?

Author

Listed:
  • Mumtaz, Haroon

    () (Bank of England)

  • Zabczyk, Pawel

    () (Bank of England)

  • Ellis, Colin

    () (Daiwa Securities SMBC Europe Ltd)

Abstract

This paper uses a factor-augmented vector autoregression technique to examine the role that macroeconomic and sector-specific factors play in UK price fluctuations at the aggregate and disaggregated levels. Macroeconomic factors are less important for disaggregated prices than aggregate ones. There also appears to be significant aggregation bias - the persistence of aggregate inflation series is much higher than the underlying persistence across the range of disaggregated price series. Our results suggest that monetary policy affects relative prices in the short to medium term, and that the degree of competition within industries plays a role in determining pricing behaviour.

Suggested Citation

  • Mumtaz, Haroon & Zabczyk, Pawel & Ellis, Colin, 2009. "What lies beneath: what can disaggregated data tell us about the behaviour of prices?," Bank of England working papers 364, Bank of England.
  • Handle: RePEc:boe:boeewp:0364
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    References listed on IDEAS

    as
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    Citations

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    Cited by:

    1. Imran Hussain Shaha & Simón Sosvilla-Rivero, 2017. "Seeking price and macroeconomic stabilisation in the euro area: The role of house prices and stock prices," Working Papers del Instituto Complutense de Estudios Internacionales 1707, Universidad Complutense de Madrid, Instituto Complutense de Estudios Internacionales.
    2. Adolfson, Malin & Lindé, Jesper, 2011. "Parameter Identification in a Estimated New Keynesian Open Economy Model," Working Paper Series 251, Sveriges Riksbank (Central Bank of Sweden).
    3. repec:mbr:jmonec:v:6:y:2012:i:4:p:27-60 is not listed on IDEAS
    4. Kaufmann, Daniel & Lein, Sarah M., 2013. "Sticky prices or rational inattention – What can we learn from sectoral price data?," European Economic Review, Elsevier, vol. 64(C), pages 384-394.
    5. Chong, Terence Tai Leung & Zhu, Tingting & Rafiq, M.S., 2013. "Are Prices Sticky in Large Developing Economies? An Empirical Comparison of China and India," MPRA Paper 60985, University Library of Munich, Germany.
    6. Fuhrer, Jeffrey C., 2010. "Inflation Persistence," Handbook of Monetary Economics,in: Benjamin M. Friedman & Michael Woodford (ed.), Handbook of Monetary Economics, edition 1, volume 3, chapter 9, pages 423-486 Elsevier.
    7. Dixon, Huw & Franklin, Jeremy & Millard, Stephen, 2014. "Sectoral shocks and monetary policy in the United Kingdom," Bank of England working papers 499, Bank of England.
    8. Ellis, Colin, 2009. "Do supermarket prices change from week to week?," Bank of England working papers 378, Bank of England.
    9. Philip Bunn & Colin Ellis, 2012. "Examining The Behaviour Of Individual UK Consumer Prices," Economic Journal, Royal Economic Society, vol. 122(558), pages 35-55, February.
    10. Philip Bunn & Colin Ellis, 2012. "How do Individual UK Producer Prices Behave?," Economic Journal, Royal Economic Society, vol. 122(558), pages 16-34, February.

    More about this item

    Keywords

    Inflation persistence; disaggregation; principal components;

    JEL classification:

    • C30 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - General
    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • 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

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