Examining Contributions to Core Consumer Inflation Measures

FRB of Atlanta Working Paper No. 2004-7

52 Pages Posted: 27 May 2004

See all articles by Andy Bauer

Andy Bauer

Federal Reserve Bank of Richmond; Federal Reserve Bank of Atlanta

Nicholas Haltom

Federal Reserve Bank of Atlanta

Date Written: April 2004

Abstract

The purpose of this paper is to examine the composition of inflation over time. The authors calculate the contributions to inflation for individual series of the consumer price index (CPI) and personal consumption expenditures price index (PCEPI) and then aggregate those contributions into major consumer expenditure categories. This technique provides a wealth of information concerning aggregate inflation behavior in a concise way, enabling the authors to describe the composition of inflation at any point in time. A particularly important benefit of this method is that it allows them to distinguish broad-based changes in inflation from changes due to relative price movements of a few components. The authors examine long-term trends in contributions to PCEPI core inflation and make inferences about the direction of inflation in the near term. In addition, they examine the decline in CPI core inflation over the 2002-03 period and find that the decline was largely driven by relative price changes of two components.

Keywords: CPI, consumer price index, PCE price index, inflation, prices

JEL Classification: C43, E31

Suggested Citation

Bauer, Andrew and Haltom, Nicholas, Examining Contributions to Core Consumer Inflation Measures (April 2004). FRB of Atlanta Working Paper No. 2004-7, Available at SSRN: https://ssrn.com/abstract=550524 or http://dx.doi.org/10.2139/ssrn.550524

Andrew Bauer

Federal Reserve Bank of Richmond ( email )

P.O. Box 27622
Richmond, VA 23261
United States

Federal Reserve Bank of Atlanta ( email )

1000 Peachtree Street N.E.
Atlanta, GA 30309-4470
United States

Nicholas Haltom (Contact Author)

Federal Reserve Bank of Atlanta ( email )

1000 Peachtree Street N.E.
Atlanta, GA 30309-4470
United States

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