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Working Paper
Connectionist-based rules describing the pass-through of individual goods prices into trend inflation in the United States
This paper examines the inflation "pass-through" problem in American monetary policy, defined as the relationship between changes in the growth rates of individual goods and the subsequent economy-wide rate of growth of consumer prices. Granger causality tests robust to structural breaks are used to establish initial relationships. Then, feedforward artificial neural network (ANN) is used to approximate the functional relationship between selected component subindexes and the headline CPI. Moving beyond the ANN ?black box,? we illustrate how decision rules can be extracted from the network. ...