Understanding trend inflation through the lens of the goods and services sectors

Yunjong Eo, Luis Uzeda and Benjamin Wong

CAMA Working Papers from Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University

Abstract: We distinguish between the goods and services sectors in an otherwise standard unobserved components model of U.S. inflation. Our main finding is that, while both sectors used to contribute to the overall variation in aggregate trend inflation, since the 1990s this variation has been predominantly driven by the services sector. We pinpoint two key changes in sector-specific inflation dynamics which led to our main finding: (i) a large fall in the volatility of trend goods inflation; and (ii) the disappearance of comovement between trend goods and trend services inflation. Our results are robust to inflation developments associated with the recent Covid-19 pandemic.

Keywords: sectoral trend inflation; unobserved components model; disaggregated inflation (search for similar items in EconPapers)
JEL-codes: C11 C32 E31 E52 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2022-04
New Economics Papers: this item is included in nep-mac and nep-mon
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Citations: View citations in EconPapers (4)

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Related works:
Journal Article: Understanding trend inflation through the lens of the goods and services sectors (2023)
Working Paper: Understanding Trend Inflation Through the Lens of the Goods and Services Sectors (2023)
Working Paper: Understanding Trend Inflation Through the Lens of the Goods and Services Sectors (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:een:camaaa:2022-28

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