Fiaschetti, Maurizio, Marini, Giancarlo and Scaramozzino, Pasquale (2018) Intertemporal Consumption and the Measurement of Inflation: A Dynamic Inertial Price Index. London: Centre for Financial and Management Studies (CeFIMS).
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Abstract
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.
| Item Type: | Monographs and Working Papers (Working Paper) |
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| Keywords: | Consumer price index, cost-of-living index, habit formation, inflation, monetary policy |
| SOAS Departments & Centres: | Departments and Subunits > School of Finance & Management |
| Subjects: | H Social Sciences > HA Statistics H Social Sciences > HB Economic Theory |
| Date Deposited: | 01 Oct 2018 11:01 |
| URI: | https://eprints.soas.ac.uk/id/eprint/26371 |
| Related URLs: |
https://www.cef ... h/papers/DP143/
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