Select Policy Writings
Is the Recent Inflationary Spike a Global Phenomenon (with Martín Almuzara and Argia Sbordone)
Where is Inflation Persistence Coming From? (with Martín Almuzara and Argia Sbordone)
Policy Products
Multivariate Core Trend Inflation (developed jointly with Martín Almuzara and Argia Sbordone)
A Bayesian dynamic factor model with time-varying parameters is estimated on monthly data for the seventeen major sectors of the PCE price index. The model decomposes each sector’s inflation as the sum of a common trend, a sector-specific trend, a common transitory shock, and a sector-specific transitory shock. The trend in PCE inflation is constructed as the sum of the common and the sector-specific trends weighted by the expenditure shares.The analysis uses data from all seventeen of the PCE’s sectors; however, in constructing the trend in PCE inflation, the volatile non-core sectors (that is, food and energy) are excluded. The approach builds on Stock and Watson’s 2016 “Core Inflation and Trend Inflation.”