In ation in the European Monetary Union is measured by the Harmonized Indices of Consumer Prices (HICP) and it can be analysed by breaking down the aggregate index in two different ways. One refers to the breakdown into price indexes corresponding to big groups of markets throughout the European countries and another considers the HICP by countries. Both disaggregations are of interest because in each one, the component prices are not fully cointegrated, having more than one common factor in their trends. The paper shows that the breakdown by group of markets improves the European in ation forecasts and constitutes a framework in which general and speci c indicators can be introduced for further improvements.
The purpose of this article is to improve the empirical evidence on commodity prices in various dimensions. First, we attempt to identify the extent of comovements in 44 monthly nonenergy commodity price series in order to ascertain whether the increase in comovement is a recent term phenomenon. Second, we attempt to determine the role of uncertainty in determining comovements among nonenergy prices in the short run. We diagnose the overall comovement using a dynamic factor model estimated by principal components. A factor-augmented vector autoregressive approach is used to assess the relationship of fundamentals, financial and uncertainty variables with the comovement in commodity prices. We find a greater synchronization among raw materials since December 2003. Since that date, uncertainty has played an important role in determining short-run fluctuations in nonenergy raw material prices.
This paper analyzes oil price pass-through into inflation at disaggregate level for the euro area and its four main economies (France, Germany, Italy and Spain). The pattern of responses to oil price changes is quantitatively diverse across economies and across items of disaggregate inflation. Moreover, we suggest an alternative method to the direct calculation of aggregate effects on inflation given that indirect and second-round effects may offset the positive effects found in energy inflation and dissipate the effect on total inflation.
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AbstractThe combination of individual forecasts is often a useful tool to improve forecast accuracy. The most commonly used technique for forecast combination is the mean, and it has frequently proved hard to surpass. This paper considers factor analysis to combine US inflation forecasts showing that just one factor is not enough to beat the mean and that the second one is necessary. The first factor is usually a weighted mean of the variables and it can be interpreted as a consensus forecast, while the second factor generally provides the differences among the variables and, since our observations are forecasts, it may be related with the dispersion in forecasting expectations and, in a sense, with its uncertainty. Within this approach, the paper also revisits Friedman's hypothesis relating the level of inflation with expectations uncertainty at the beginning of the 21st century.
SummaryThe recession that started in 2008 caused a sharp deterioration of the budget balance of Spain. This decline was not fully anticipated by the structural budget balance due to some methodology limitations. In this article, we calculate an alternative structural balance for Spain in the years prior to the subprime crisis that includes residential investment as an explanatory variable. This estimate shows that by 2004 the Spanish fiscal situation was not as strong as presumed. This fragility was hidden by the extraordinary revenue from the real estate bubble and the construction boom.
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