The determinants of inflation volatility: a panel data analysis for US-product categories

Marta Arespa Castello and Juan González-Alegre

Applied Economics, 2022, vol. 54, issue 35, 4060-4083

Abstract: Some macroeconomic dimensions like the economic business cycle, the exchange rate movements when the degree of country openness is significant, or the level of inflation are often considered to explain measured-inflation dynamics. However, inflation volatility may also be affected by statistical agencies methodological changes. This paper explores both potential explanations in a panel data for 100 United States CPI-U subcategories. Using both unconditional and conditional variances, we find that crucial changes in how agencies consider quality adjustment in products, together with the macroeconomic variables help to understand CPI volatility over time, both in the short-run and in the long-run.

Date: 2022
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DOI: 10.1080/00036846.2021.2020714

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