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

Bibliographic Data

ID21653540
AuthorsYunjong Eo (0000-0002-9172-2265, Department of Economics Korea University Seoul South Korea), Luis Uzeda (Bank of Canada Ottawa ON Canada), Benjamin Wong (0009-0003-5986-9333, Department of Econometrics and Business Statistics Monash University Caulfield East VIC Australia, corresponding author)
Year2023
Volume38
Issue5
Pages751-766
Publication date2023-08-01
Open AccessYes
TypeARTICLE
VenueJournal of Applied Econometrics (JOURNAL)
Journal identifiersISSN: 1099-1255 • E-ISSN: 0883-7252
PublisherWiley (PUBLISHER • GB)
DOI10.1002/jae.2975
OpenAlexW4362607337
LanguageEN
Citations received2
References cited32

We distinguish between the goods and services sectors in an unobserved components model of U.S. inflation. We find that prior to the early 1990s, both sectors contributed to volatility of aggregate trend inflation, while since then, this has been predominantly driven by the services sector, with the trend in goods inflation being essentially flat. We document that the large reduction in the volatility of the trend for goods inflation has been the most important driver of the decline in the volatility in aggregate trend inflation reported by Stock and Watson (2007). Our results appear robust to COVID‐19 inflation developments

Econometrics · Economics · Economy · Goods and services · Macroeconomics · Monetary economics · Economic theories and models · Market Dynamics and Volatility · Monetary Policy and Economic Impact

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