On the importance of sectoral shocks for price-setting

  • We use a novel disaggregate sectoral euro area dataset with a regional breakdown that allows explicit estimation of the sectoral component of price changes (rather than interpreting the idiosyncratic component as sectoral as done in other papers). Employing a new method to extract factors from over-lapping data blocks, we find for our euro area data set that the sectoral component explains much less of the variation in sectoral regional inflation rates and exhibits much less volatility than previous findings for the US indicate. Country- and region-specific factors play an important role in addition to the sector-specific factors. We conclude that sectoral price changes have a “geographical” dimension, as yet unexplored in the literature, that might lead to new insights regarding the properties of sectoral price changes.

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Author:Guenter W. Beck, Kirstin Hubrich, Massimiliano Marcellino
Parent Title (German):Center for Financial Studies (Frankfurt am Main): CFS working paper series ; No. 2009,32
Series (Serial Number):CFS working paper series (2009, 32)
Document Type:Working Paper
Year of Completion:2009
Year of first Publication:2009
Publishing Institution:Universitätsbibliothek Johann Christian Senckenberg
Release Date:2010/01/13
Tag:Common Factor Models; Disaggregated Prices; Euro Area Regional and Sectoral Inflation
GND Keyword:Europäische Union; Währungsunion; Mitgliedsstaaten; Wirtschaftssektor; Preisänderung
Institutes:Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS)
Dewey Decimal Classification:3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft
JEL-Classification:C Mathematical and Quantitative Methods / C3 Multiple or Simultaneous Equation Models
Licence (German):License LogoDeutsches Urheberrecht