Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/241211 
Year of Publication: 
2020
Series/Report no.: 
Bank of Canada Staff Working Paper No. 2020-45
Publisher: 
Bank of Canada, Ottawa
Abstract: 
We distinguish between the goods and services sectors in an otherwise standard unobserved components model of US inflation. Our main finding is that, while both sectors used to contribute to the overall variation in aggregate trend inflation, since the 1990s this variation has been driven almost entirely by the services sector. Two changes in sector-specific inflation dynamics are responsible for this finding: (i) a large fall in the variance of trend goods inflation; and (ii) the disappearance of comovement between trend goods and trend services inflation. Extensions to our baseline analysis by excluding energy prices and decomposing trend inflation into a common and a relative price component suggest a possible role of monetary policy in explaining our empirical findings. We also document similar changes in inflation dynamics internationally when extending our analysis to Australia and Canada.
Subjects: 
Econometric and statistical methods
Transmission of monetary policy
Inflation and prices
JEL: 
C11
C32
E31
E52
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.