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What lies beneath: what can disaggregated data tell us about the behaviour of prices?

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Author Info
Mumtaz, Haroon () (Bank of England)
Zabczyk, Pawel () (Bank of England)
Ellis, Colin () (Daiwa Securities SMBC Europe Ltd)

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Abstract

This paper uses a factor-augmented vector autoregression technique to examine the role that macroeconomic and sector-specific factors play in UK price fluctuations at the aggregate and disaggregated levels. Macroeconomic factors are less important for disaggregated prices than aggregate ones. There also appears to be significant aggregation bias - the persistence of aggregate inflation series is much higher than the underlying persistence across the range of disaggregated price series. Our results suggest that monetary policy affects relative prices in the short to medium term, and that the degree of competition within industries plays a role in determining pricing behaviour.

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File URL: http://www.bankofengland.co.uk/publications/workingpapers/wp364.pdf
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Publisher Info
Paper provided by Bank of England in its series Bank of England working papers with number 364.

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Length: 32 pages
Date of creation: 20 Mar 2009
Date of revision:
Handle: RePEc:boe:boeewp:0364

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Related research
Keywords: Inflation persistence; disaggregation; principal components;

Find related papers by JEL classification:
C30 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - General
D40 - Microeconomics - - Market Structure and Pricing - - - General
E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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This page was last updated on 2009-10-18.

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