Data aggregation and estimates of persistence

Article type: Research Article

Authors: Bação, Pedro^{a; *}

Affiliations: [a] GEMF and Faculty of Economics of the University of Coimbra, Coimbra, Portugal

Correspondence: [*] Address for correspondence: Faculdade de Economia da Universidade de Coimbra, Av. Dias da Silva 165, 3004-512 Coimbra, Portugal. Tel.: +351 239 790500; Fax: +351 239 790514; E-mail: [email protected]

Abstract: This paper studies the relation between different formulas for computing aggregate price indices and estimates of inflation persistence. The relevance of "aggregation bias" for policy making is discussed. We show that "aggregation bias" may not be a concern for a cautious policy-maker. We also show that chained indices are likely to be preferred by econometricians, rather than log-aggregates.

Keywords: Inflation, aggregation, chain indices, persistence, monetary policy

DOI: 10.3233/JEM-2007-0285

Journal: Journal of Economic and Social Measurement, vol. 32, no. 2-3, pp. 113-127, 2007