Measuring core inflation in Italy comparing aggregate vs. disaggregate price data |
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Authors: | Giacomo Sbrana Andrea Silvestrini |
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Institution: | (1) Universit? de Strasbourg, Bureau d’?conomie Th?orique et Appliqu?e (BETA), 61 Avenue de la For?t Noire, 67085 Strasbourg Cedex, France;(2) Economics, Research and International Relations, Economic and Financial Statistics Department, Bank of Italy, Via Nazionale, 91, 00184 Roma, Italy |
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Abstract: | This paper focuses on the core inflation measurement in Italy using univariate (national-level inflation) vs. multivariate
(city-level inflation) models during the period 1970–2006. We derive algebraic expressions that allow comparison between the
reduced form parameters of univariate and multivariate local level models in the context of contemporaneous and temporal aggregation.
We illustrate the relevance of these theoretical results for the empirical analysis of time series. Using Italian data, we
find that multivariate and univariate models extract similar core inflation measures when analyzing the moderate-low inflation
period. In contrast, the two competing models yield different trends when modeling the Great Inflation period. |
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