Supply-side sources of inflation: evidence from OECD countries
We evaluate the merits of the "supply-side" view under which inflation results from sectoral shocks, and compare it with the "classical" view in which inflation results from aggregate factors such as variations in money growth. Using a panel VAR methodology applied to data for 13 GECD countries, we find support for a multi-shock view of inflation: supply-side shocks are statistically significant determinants of inflation, even after taking into account aggregate demand factors. While oil prices are the dominant supply-side influence, other measures such as the skewness of relative price changes are important as well. At short horizons, an innovation to skewness leads to an increase in inflation of 0.5 percentage points. As suggested by the classical view, money growth plays an increasingly important role as the time horizon lengthens.
|Date of creation:||1995|
|Date of revision:|
|Contact details of provider:|| Postal: 20th Street and Constitution Avenue, NW, Washington, DC 20551|
Web page: http://www.federalreserve.gov/
More information through EDIRC
|Order Information:||Web: http://www.federalreserve.gov/pubs/ifdp/order.htm|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Michael F. Bryan & Stephen G. Cecchetti, 1993.
"Measuring Core Inflation,"
NBER Working Papers
4303, National Bureau of Economic Research, Inc.
- Laurence Ball & N. Gregory Mankiw, 1995.
"Relative-Price Changes as Aggregate Supply Shocks,"
The Quarterly Journal of Economics,
Oxford University Press, vol. 110(1), pages 161-193.
- Laurence Ball & N. Gregory Mankiw, 1993. "Relative-price changes as aggregate supply shocks," Working Papers 93-13, Federal Reserve Bank of Philadelphia.
- Laurence Ball & N. Gregory Mankiw, 1992. "Relative-Price Changes as Aggregate Supply Shocks," NBER Working Papers 4168, National Bureau of Economic Research, Inc.
- Ball, L. & Mankiw, G.H., 1992. "Relative-Price Change as Aggregate Supply Shocks," Harvard Institute of Economic Research Working Papers 1609, Harvard - Institute of Economic Research.
- F. J. M. Meyer-zu-Schlochtern, 1988. "An International Sectoral Data Base for Thirteen OECD Countries," OECD Economics Department Working Papers 57, OECD Publishing.
- Ricardo J. Caballero & Eduardo M.R.A. Engel, 1992.
"Microeconomic Rigidities and Aggregate Price Dynamics,"
NBER Working Papers
4162, National Bureau of Economic Research, Inc.
- Caballero, Ricardo J. & Engel, Eduardo M. R. A., 1993. "Microeconomic rigidities and aggregate price dynamics," European Economic Review, Elsevier, vol. 37(4), pages 697-711, May.
- Stanley Fischer, 1981. "Relative Shocks, Relative Price Variability, and Inflation," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 12(2), pages 381-442.
- Nickell, Stephen J, 1981. "Biases in Dynamic Models with Fixed Effects," Econometrica, Econometric Society, vol. 49(6), pages 1417-26, November.
- Debelle, Guy & Lamont, Owen, 1997.
"Relative Price Variability and Inflation: Evidence from U.S. Cities,"
Journal of Political Economy,
University of Chicago Press, vol. 105(1), pages 132-52, February.
- Guy Debelle & Owen Lamont, 1996. "Relative Price Variability and Inflation: Evidence from US Cities," NBER Working Papers 5627, National Bureau of Economic Research, Inc.
- Boschen, John F & Talbot, Kathleen E, 1991. "Monetary Base Growth, Deposit Growth, and Inflation in the Postwar United States," The Journal of Business, University of Chicago Press, vol. 64(3), pages 313-37, July.
- Fama, Eugene F., 1983. "Financial intermediation and price level control," Journal of Monetary Economics, Elsevier, vol. 12(1), pages 7-28.
When requesting a correction, please mention this item's handle: RePEc:fip:fedgif:515. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Marlene Vikor)
If references are entirely missing, you can add them using this form.