Analysis of Inflation/Deflation: Clusters of micro prices matter!

Yuichi Kichikawa, Hideaki Aoyama, Yoshi Fujiwara, Hiroshi Iyetomi and Hiroshi Yoshikawa

Discussion papers from Research Institute of Economy, Trade and Industry (RIETI)

Abstract: Micro price data show that individual price settings are not time-invariant. Furthermore, the analysis of autocorrelations shows that interactions of micro prices with leads and lags play a significant role in explaining the behavior of aggregate price index. We present a new method of extracting information on the nature of such interactions of micro prices. For Japan's data, we identify two macro shocks—one external and the other domestic—to drive dynamics of prices, but find that irrespective of the sources of shocks, there exists a robust flow of changes of domestic prices from upstream to downstream. Prices change in clusters. We identify such clusters. Our analysis suggests that inertia arising from input/output relationships in production explains the behavior of aggregate prices.

Pages: 40 pages
Date: 2018-08
New Economics Papers: this item is included in nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.rieti.go.jp/jp/publications/dp/18e055.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eti:dpaper:18055

Access Statistics for this paper

More papers in Discussion papers from Research Institute of Economy, Trade and Industry (RIETI) Contact information at EDIRC.
Bibliographic data for series maintained by TANIMOTO, Toko ().