Premium
THE TIME‐SERIES PROPERTIES OF UK INFLATION: EVIDENCE FROM AGGREGATE AND DISAGGREGATE DATA
Author(s) -
Byrne Joseph P.,
Kontonikas Alexandros,
Montagnoli Alberto
Publication year - 2010
Publication title -
scottish journal of political economy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.4
H-Index - 46
eISSN - 1467-9485
pISSN - 0036-9292
DOI - 10.1111/j.1467-9485.2009.00505.x
Subject(s) - economics , unit root , inflation (cosmology) , aggregate (composite) , econometrics , monetary policy , aggregate data , series (stratigraphy) , persistence (discontinuity) , panel data , macroeconomics , statistics , mathematics , paleontology , physics , materials science , geotechnical engineering , biology , theoretical physics , engineering , composite material
This paper contrasts the time‐series properties of aggregate and disaggregate UK inflation. While aggregate inflation is found to be non‐stationary, unit root rejection frequencies are increasing when we use more disaggregate data. Structural break analysis suggests that structural shifts in monetary policy could alter inflation persistence. Additionally, panel evidence indicates that the unit root hypothesis can be rejected for sectoral inflation rates. Finally, we compare the persistence properties of UK inflation, finding statistically significant differences between aggregate and disaggregate series. Our analysis suggests that aggregation matters, which has important implications for econometric analysis and the conduct of monetary policy.