Energy Prices, Inflation, and Recession, 1974-1975

Import Prices and Inflation

Understanding the consequences of international developments for domestic inflation is an extremely important question for central banks. But before we claim to have measured the extent of import price pass-through, it is necessary to be clear on exactly what such a number is intended to mean. One can attempt to come up with an answer on the basis of either economic theory or empirical evidence...

Inflation and health care prices.

Budget deficits, inflation risk, and asset prices

Kitchen examines how US budget deficit news affects asset prices and concludes that news of lower deficits reduces the inflation risk premium. This paper constructs narrative histories of several deficit-reduction laws to identify when markets learned that deficits would fall. It then estimates a multi-factor model that allows the inflation risk premium to vary following news of deficit-reducti...

Relative Goods’ Prices and Pure Inflation

This paper uses a dynamic factor model for the quarterly changes in consumption goods’ prices to separate them into three components: idiosyncratic relative-price changes, aggregate relative-price changes, and changes in the unit of account. The model identifies a measure of “pure” inflation: the common component in goods’ inflation rates that has an equiproportional effect on all prices and is...

Commodity Prices, Convenience Yields, and Inflation

This paper provides evidence that the two leading principal components in a panel of 23 commodity convenience yields have statistically and quantitatively important predictive power for inflation even after controlling for unemployment gap and oil prices. The results hold up in out-of-sample forecasts, across forecast horizons, and across G7 countries. The convenience yields also explain commod...