IDEAS home Printed from https://ideas.repec.org/p/pcp/pucwps/wp00315.html
   My bibliography  Save this paper

A Factorial Decomposition Of Inflation In Peru, An Alternative Measure Of Core Inflation

Author

Listed:
  • Alberto Humala

    ()

  • Gabriel Rodríguez

    () (Departamento de Economía - Pontificia Universidad Católica del Perú)

Abstract

A dynamic factorial decomposition model of inflation is estimated using Peruvian monthly data for 1995:01-2008:07. This model allows identification of changes in three relevant ináation components: idiosyncratic relative prices, aggregate relative prices, and absolute prices. Furthermore, following Reis and Watson (2007), the model allows measuring pure inflation as the common factor in the inflation rate that has a proportionate effect to all prices and that is not correlated with relative price changes at any period of time. This pure inflation estimate relates closely to standard measures of core inflation. Results are robust to different lag structures and various stochastic assumptions on the estimated factors.

Suggested Citation

  • Alberto Humala & Gabriel Rodríguez, 2011. "A Factorial Decomposition Of Inflation In Peru, An Alternative Measure Of Core Inflation," Documentos de Trabajo / Working Papers 2011-315, Departamento de Economía - Pontificia Universidad Católica del Perú.
    • Handle: RePEc:pcp:pucwps:wp00315
    as

    Download full text from publisher

    File URL: http://files.pucp.edu.pe/departamento/economia/DDD315.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Jean Boivin & Marc P. Giannoni & Ilian Mihov, 2009. "Sticky Prices and Monetary Policy: Evidence from Disaggregated US Data," American Economic Review, American Economic Association, vol. 99(1), pages 350-384, March.
    2. Altissimo, Filippo & Mojon, Benoit & Zaffaroni, Paolo, 2009. "Can aggregation explain the persistence of inflation?," Journal of Monetary Economics, Elsevier, vol. 56(2), pages 231-241, March.
    3. Cristadoro, Riccardo & Forni, Mario & Reichlin, Lucrezia & Veronese, Giovanni, 2001. "A Core Inflation Index for the Euro Area," CEPR Discussion Papers 3097, C.E.P.R. Discussion Papers.
    4. Mario Forni & Marc Hallin & Marco Lippi & Lucrezia Reichlin, 2000. "The Generalized Dynamic-Factor Model: Identification And Estimation," The Review of Economics and Statistics, MIT Press, vol. 82(4), pages 540-554, November.
    5. Bai, Jushan, 2004. "Estimating cross-section common stochastic trends in nonstationary panel data," Journal of Econometrics, Elsevier, vol. 122(1), pages 137-183, September.
    6. Marlene Amstad & Simon M. Potter, 2009. "Real time underlying inflation gauges for monetary policymakers," Staff Reports 420, Federal Reserve Bank of New York.
    7. Michal Brzoza-Brzezina & Jacek Kotlowski, 2009. "Estimating pure inflation in the Polish economy," Working Papers 37, Department of Applied Econometrics, Warsaw School of Economics.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Wojciech Charemza & Imran Husssain Shah, 2013. "Stability price index, core inflation and output volatility," Applied Economics Letters, Taylor & Francis Journals, vol. 20(8), pages 737-741, May.

    More about this item

    Keywords

    Factoral Decomposition / Pure Inflation / Core Inflation / Price Changes;

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pcp:pucwps:wp00315. 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: (). General contact details of provider: http://edirc.repec.org/data/depucpe.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.