Academic journal article Monthly Labor Review

Structural Change and Price Changes. (Precis)

Academic journal article Monthly Labor Review

Structural Change and Price Changes. (Precis)

Article excerpt

Two key measures of the nature of price changes have themselves changed over the past 20 years, according to Jonathan L. Willis's article in the Federal Reserve Bank of Kansas City Economic Review. He cites strong evidence of declines in quarter-to-quarter and year-to-year variability of inflation and somewhat less conclusive reports that the time it takes for the rate of price change to return to its baseline after an unexpected change may have been reduced. In the case of volatility, Willis notes that the average absolute change in quarterly rates of change in the core Consumer Price Index (CPI) has dropped from 0.32 percentage point in 1960-82 to 0.12 percentage point from 1983 to 2002. In a formal test of inflation's persistence in which a value near 1 indicates extremely high persistence and 0 means no persistence, he reports that there was a break in the pattern of persistence in core CPI inflation in the third quarter of 1990. …

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