Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/86126
Authors: 
Castagnino, Tomás
D'Amato, Laura
Year of Publication: 
2008
Series/Report no.: 
Working Paper, Central Bank of Argentina (BCRA) 2008/38
Abstract: 
Using frequency domain techniques to separate short and long run dynamics and decomposing inflation into its common and idiosyncratic components, we study the regime dependence of the inflation-RPV relation in Argentina and the USA. Under High inflation, strong long-run comovement between RPV and Inflation is found for both economies, that extends to the short run adding extra noise to that usually present at high frequencies. High inflation also leads to ideosyncratic movements in prices that do not cancel out, adding persistence to the process. When inflation is low, no long-run interaction between variables is expected. This is the case of the US, even though supply shocks are comparable to those of the seventies when trend inflation was high. Surprisingly, the findings for Argentina do not support the a-priori as both variables show significant long term comovement. Studying disaggregate price responses to common shocks helps to understand sectoral pattens behind these dynamics. Our results suggest that long run variablity in inflation can be induced, not only by a high trend inflation, but also by policy stabilization efforts based on relative price adjustments.
Subjects: 
inflation
frequency domain analysis
regime
common shocks
monetary policy
relative prices
JEL: 
C22
C43
E31
E52
Document Type: 
Working Paper

Files in This Item:
File
Size
567.69 kB





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