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Turning Points in Inflation: A Structural Breaks Approach with Micro Data

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Listed:
  • Alberto Cavallo
  • Gaston Garcia Zavaleta

Abstract

We introduce a novel methodology for detecting inflation turning points that com-bines high-frequency, disaggregated price data with standard structural break techniques to provide policymakers with more timely and precise signals of inflation dynamics. The methodology consists of three key components: measuring inflation as the slope of the log price index rather than using conventional inflation rates, employing structural break techniques to detect shifts in this slope, and leveraging highly disaggregated price indexes to identify trend breaks at a granular level. We apply this approach to study two critical recent episodes: Argentina’s 2024–2025 disinflation and the inflationary impact of U.S. tariff adjustments in 2025. For Argentina, we detect a broad-based disinflationary turning point in May 2024. For the U.S., we find evidence of a turning point in February 2025, with significant sectoral inflation accelerations despite stable aggregate inflation measures. These applications demonstrate the utility of our approach for enhancing real-time inflation monitoring and policy decision-making.

Suggested Citation

  • Alberto Cavallo & Gaston Garcia Zavaleta, 2025. "Turning Points in Inflation: A Structural Breaks Approach with Micro Data," NBER Working Papers 34102, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:34102
    Note: EFG IFM ME
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    More about this item

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C55 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Large Data Sets: Modeling and Analysis
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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