Common and Idiosyncratic Inflation

Hie Joo Ahn and Matteo Luciani
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Hie Joo Ahn: https://www.federalreserve.gov/econres/hie-joo-ahn.htm

No 2020-024r1, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: We disentangle price changes due to economy-wide shocks from those driven by idiosyncratic shocks by estimating a two-regime dynamic factor model with dynamic loadings on a new large dataset of finely disaggregated monthly personal consumption expenditures price inflation indexes for 1959-2023. We find that up to the mid-1990s and after the Covid pandemic, common shocks were the primary driver of US inflation dynamics and had long-lasting effects. In between, idiosyncratic shocks were the main driver, and common shocks had short-lived effects.

Keywords: Core inflation; Dynamic factor model; Disaggregated consumer prices; Monetary policy (search for similar items in EconPapers)
JEL-codes: C32 C43 C55 E31 E37 (search for similar items in EconPapers)
Pages: 72 p.
Date: 2020-03-05, Revised 2024-08-01
New Economics Papers: this item is included in nep-cba, nep-gen, nep-mac and nep-mon
Note: Revision
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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https://www.federalreserve.gov/econres/feds/files/2020024r1pap.pdf (application/pdf)

Related works:
Working Paper: Common and Idiosyncratic Inflation (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfe:2020-24

DOI: 10.17016/FEDS.2020.024r1

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