Home >> Working Paper
Sectoral Prices Dynamics, Idiosyncratic Shocks and Monetary Policy
Read        DownLoad
TitleSectoral Prices Dynamics, Idiosyncratic Shocks and Monetary Policy  
AuthorDu Haitao and Deng Xiang  
OrganizationSouthwest University for Nationalities, Sichuan University; 
Key WordsDynamic factor models; Structural VARs; Sectoral Prices; Aggregate Prices 
AbstractStructural VARs have to exploit not only a limited amount of information, but cause estimation bias. However, dynamic factor model can overcome structural VARs’s shortcoming, which combine large-dimensional factor model with structural VARs. We attempt to decompose ?uctuations in sectoral prices into common and idiosyncratic components using a dynamic factor model in order to shed light on sectoral and aggregate in?ation dynamics in China. Our main findings support the basic facts in the related literature. Furthermore, we find some China-specific characteristics: (1) the common component share in sectoral inflation is larger than that of US and Euro area; (2) comparing with consumer’s goods, aggregate macro shocks account for more of variance in sectoral price of producer’s goods and material of production; (3) even in aggregate level, idiosyncratic shocks contribute more to variance of consumer’s goods prices.  
Serial NumberWP582 
  • Institute of Economics, Chinese Academy of Social Sciences
  • Copyright Economic Research Journal
  • The uploaded articles by this website express the authors’ views, not necessarily the views of this website.
  • Perennial Legal Counsel: Lu Kang (Chong Guang Law Office)
  • ISSN 0577-9154 CN 11-1081/F Postal Distribution Code 2-25l (Domestic) M16 (Overseas)
  • ICP 10211437 (Beijng)
  • No.2,Yuetan Bei Xiaojie, Xicheng District, Beijing 100836, P. R. China
  • Phone/Fax: (+8610) 68034153