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Disaggregate evidence on the persistence of consumer price inflation

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  • Todd E. Clark

Abstract

This paper uses disaggregate inflation data spanning all of consumption to examine: (i) the persistence of disaggregate inflation relative to aggregate inflation; (ii) the distribution of persistence across consumption sectors; and (iii) whether persistence has changed. Assuming mean inflation to be unchanged within samples, the average persistence of disaggregate inflation is consistently below aggregate persistence. Taking into account an early 1990s shift in mean inflation identified by break tests?including tests applied to systems of disaggregate equations?yields much lower estimates of both aggregate and disaggregate persistence for 1984-02. But with the mean break taken into account, average disaggregate persistence is actually as great as aggregate inflation persistence. A factor model provides a natural framework for interpreting the relationship between aggregate and disaggregate persistence.

Suggested Citation

  • Todd E. Clark, 2003. "Disaggregate evidence on the persistence of consumer price inflation," Research Working Paper RWP 03-11, Federal Reserve Bank of Kansas City.
  • Handle: RePEc:fip:fedkrw:rwp03-11
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