Working Paper Revision

Common and Idiosyncratic Inflation

Abstract: We disentangle price changes due to economy-wide shocks from those driven by idiosyncratic shocks by estimating a two-regime dynamic factor model with dynamic loadings on a new large dataset of finely disaggregated monthly personal consumption expenditures price inflation indexes for 1959-2023. We find that up to the mid-1990s and after the Covid pandemic, common shocks were the primary driver of US inflation dynamics and had long-lasting effects. In between, idiosyncratic shocks were the main driver, and common shocks had short-lived effects.

JEL Classification: C32; C43; C55; E31; E37;

https://doi.org/10.17016/FEDS.2020.024r1

Bibliographic Information

Provider: Board of Governors of the Federal Reserve System (U.S.)

Part of Series: Finance and Economics Discussion Series

Publication Date: 2024-08-01

Number: 2020-024r1

Note: Revision

Related Works

• Working Paper Revision (2024-08-01) : You are here.
• Working Paper Original (2020-03-05) : Common and Idiosyncratic Inflation