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Linking Individual and Aggregate Price Changes

Author

Listed:
  • Attila Rátfai

    (Central European University, Budapest)

Abstract

Standard macroeconomic forecasting indicators and techniques perform poorly in predicting inflation in the short-run. In contrast, the present paper shows that microeconomic price data placed in an empirical framework rooted in (S,s) pricing theory convey extra information on inflation dynamics. The latent variable model designed to capture the gap between the target and the actual price is applied to a unique, highly disaggregated panel data set of consumer prices. Fluctuations in the shape of the cross-sectional density of price deviations contribute to short-run in-sample inflation. Asymmetry in the density particularly matters.

Suggested Citation

  • Attila Rátfai, 2002. "Linking Individual and Aggregate Price Changes," 10th International Conference on Panel Data, Berlin, July 5-6, 2002 B4-2, International Conferences on Panel Data.
    • Handle: RePEc:cpd:pd2002:b4-2
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    File URL: http://econpapers.repec.org/cpd/2002/72_Ratfai.pdf
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    Citations

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    Cited by:

    1. Babutsidze, Zakaria, 2006. "(S,s) Pricing: Does the Heterogeneity Wipe Out the Asymmetry on Micro Level?," MERIT Working Papers 2006-033, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    2. Emmanuel Dhyne & Jerzy Konieczny & Fabio Rumler & Patrick Sevestre, 2009. "Price rigidity in the euro area - An assessment," European Economy - Economic Papers 2008 - 2015 380, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    3. Dhyne, Emmanuel & Fuss, Catherine & Pesaran, M. Hashem & Sevestre, Patrick, 2011. "Lumpy Price Adjustments: A Microeconometric Analysis," Journal of Business & Economic Statistics, American Statistical Association, vol. 29(4), pages 529-540.
    4. Emmanuel Dhyne, 2009. "A global assessment of the degree of price stickiness - results from the NBB Business survey," Brussels Economic Review, ULB -- Universite Libre de Bruxelles, vol. 52(1), pages 57-77.
    5. Jerzy D. Konieczny, 2006. "Discussion of: Lumpy Price Adjustments: A Microeconometric Analysis," Working Papers jk0035, Wilfrid Laurier University, Department of Economics, revised 1970.
    6. Giovanni Caggiano & Efrem Castelnuovo, 2008. "Long Memory and Non-Linearities in International Inflation," "Marco Fanno" Working Papers 0076, Dipartimento di Scienze Economiche "Marco Fanno".

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