Trend, Seasonal, and Sectoral Inflation in the Euro Area
James H. Stock and
Mark W. Watson
Working Papers Central Bank of Chile from Central Bank of Chile
Abstract:
An unobserved components model with stochastic volatility is used to decompose aggregate Euro area HICP inflation into a trend, seasonal and irregular components. Estimates of the components based only on aggregate data are imprecise: the width of 68% error bands for the seasonally adjusted value of aggregate inflation is 1.0 percentage points in the final quarter of the sample. Estimates are more precise using a multivariate model for a 13-sector decomposition of aggregate inflation, which yields a corresponding error band that is roughly 40% narrower. Trend inflation exhibited substantial variability during the 2001-2018 period and this variability closely mirrored variation in real activity.
Date: 2019-10
New Economics Papers: this item is included in nep-eec, nep-ets, nep-mac and nep-mon
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Persistent link: https://EconPapers.repec.org/RePEc:chb:bcchwp:847
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