%0 Journal Article %1 altissimo2009aggregation %A Altissimo, Filippo %A Mojon, Benoit %A Zaffaroni, Paolo %D 2009 %J Journal of Monetary Economics %K dynamic_factor_model euro_area inflation_persistence sectoral_data %N 2 %P 231 - 241 %R 10.1016/j.jmoneco.2008.12.013 %T Can aggregation explain the persistence of inflation? %U http://www.sciencedirect.com/science/article/pii/S0304393209000038 %V 56 %X An aggregation exercise is proposed that aims at investigating whether the fast average adjustments of the disaggregate inflation series of the euro area \CPI\ is coherent with the slow adjustment of euro area aggregate inflation. Estimating a dynamic factor model for 404 inflation sub-indices of the euro area \CPI\ allows to decompose the dynamics of inflation sub-indices into a part due to a common macroeconomic shock and to sector specific idiosyncratic shocks. Although idiosyncratic shocks dominate the variance of sectoral prices, one common factor appears to be the main driver of aggregate dynamics. In addition, the heterogenous propagation of this common shock across sectoral inflation rates, and in particular its slow propagation to inflation rates of services, generates the persistence of aggregate inflation. We conclude that the aggregation mechanism explains a significant amount of aggregate inflation persistence.

@article{altissimo2009aggregation, abstract = {An aggregation exercise is proposed that aims at investigating whether the fast average adjustments of the disaggregate inflation series of the euro area \{CPI\} is coherent with the slow adjustment of euro area aggregate inflation. Estimating a dynamic factor model for 404 inflation sub-indices of the euro area \{CPI\} allows to decompose the dynamics of inflation sub-indices into a part due to a common macroeconomic shock and to sector specific idiosyncratic shocks. Although idiosyncratic shocks dominate the variance of sectoral prices, one common factor appears to be the main driver of aggregate dynamics. In addition, the heterogenous propagation of this common shock across sectoral inflation rates, and in particular its slow propagation to inflation rates of services, generates the persistence of aggregate inflation. We conclude that the aggregation mechanism explains a significant amount of aggregate inflation persistence. }, added-at = {2013-06-17T16:37:07.000+0200}, author = {Altissimo, Filippo and Mojon, Benoit and Zaffaroni, Paolo}, biburl = {https://www.bibsonomy.org/bibtex/266f35c318d1c28f7b8579247db1a0dd2/jp}, description = {Can aggregation explain the persistence of inflation?}, doi = {10.1016/j.jmoneco.2008.12.013}, interhash = {cd991f204460cdcc45a46bd7d6fbf278}, intrahash = {66f35c318d1c28f7b8579247db1a0dd2}, issn = {0304-3932}, journal = {Journal of Monetary Economics }, keywords = {dynamic_factor_model euro_area inflation_persistence sectoral_data}, number = 2, pages = {231 - 241}, timestamp = {2013-06-17T16:37:07.000+0200}, title = {Can aggregation explain the persistence of inflation? }, url = {http://www.sciencedirect.com/science/article/pii/S0304393209000038}, volume = 56, year = 2009 }