Intertemporal Consumption and the Measurement of Inflation: A Dynamic Inertial Price Index
| Main author: | Fiaschetti, Maurizio |
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| Other authors: | Marini, GiancarloScaramozzino, Pasquale |
| Format: | Monographs and Working Papers |
| Online access: |
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| Summary: |
This paper develops a new price index (DIPI) and discusses its characteristics and dynamics. By allowing for habit formation and inertia, our model extends typical dynamic indexes that have a forward looking component, thus providing a more effective support for the design of policy measures. We calculate the DIPI for a sample of goods for the US and prove its effectiveness in tracking business cycle, thus resulting in a more reliable indicator for the design of policy measures. Comparison with the official inflation measure matches the results of the Boskin Commission, which argues that CPI overestimates inflation. |
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| Other authors: | Marini, Giancarlo, Scaramozzino, Pasquale |
| Language: | English |
| Published: |
Centre for Financial and Management Studies (CeFIMS)
2018
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| Subjects: |