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Transitory or Persistent? What the Frequency of Price Changes May Tell Us about Inflation

Author

Listed:
  • Christopher D. Cotton
  • Vaishali Garga

Abstract

This brief shows how distinguishing between the dynamics of frequently and infrequently adjusted prices can provide insight into the nature of inflation—whether inflation pressures are new and transitory or sustained and spreading. It breaks down the non-rent portion of the Consumer Price Index into two subindexes, one for products that change prices frequently (the flexible sector) and one for products that change prices infrequently (the sticky sector).

Suggested Citation

  • Christopher D. Cotton & Vaishali Garga, 2025. "Transitory or Persistent? What the Frequency of Price Changes May Tell Us about Inflation," Current Policy Perspectives 25-11, Federal Reserve Bank of Boston.
    • Handle: RePEc:fip:fedbcq:101517
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    References listed on IDEAS

    as
    1. Mark Bils & Peter J. Klenow, 2004. "Some Evidence on the Importance of Sticky Prices," Journal of Political Economy, University of Chicago Press, vol. 112(5), pages 947-985, October.
    2. Christopher D. Cotton & Vaishali Garga, 2022. "The Role of Industrial Composition in Driving the Frequency of Price Change," Working Papers 22-9, Federal Reserve Bank of Boston.
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    Keywords

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    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
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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