Monday, May 24, 2010

Measuring inflation

The Cleveland Fed reports some new research by Bryan and Meyer that tries to break price changes down into those that are frequent and those that happen only occasionally. The occasional changes are seen as being affected by the outlook for future inflation and therefore provide a signal about inflation expectations. They produce a flexible price index and a sticky price index. The sticky price index seems to contain some valuable information that improves the forecast of future inflation.

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