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Recent Inflation-Related Research

Inflation-Related Economic Commentary

Economic Commentary provides research, analysis, and perspectives on an economic topic or policy issue.

  • Semiconductor Shortages and Vehicle Production and Prices

    Pawel Krolikowski Kristoph Naggert


    Vehicle production has fallen since the beginning of the pandemic recession. We investigate reasons for this decline. Manufacturers in this industry cite insufficient materials, including a lack of semiconductors, as increasingly responsible. Demand seems to be less of an issue. In fact, demand has been strong, and together with accelerating prices and sharply declining inventories, it suggests an insufficient supply of new cars. Our best guess is that the materials shortages and their effects on new car prices will subside within the next six to nine months.  Read More

  • Why Has Durable Goods Spending Been So Strong during the COVID-19 Pandemic?

    Kristen Tauber Willem Van Zandweghe


    Consumers increased their purchases of durable goods notably during the COVID-19 pandemic. The pandemic may have lifted the demand for durable goods directly, by shifting consumer preferences away from services toward a variety of durable goods. It may also have stimulated spending on durable goods indirectly, by prompting a strong fiscal policy response that raised disposable income. We estimate the historical relationship between durable goods spending and income and find that income gains in 2020 accounted for about half of the increase in durable goods spending, indicating that the direct and indirect effects of the pandemic on durable goods spending were about equally important.  Read More

  • Expected Post-Pandemic Consumption and Scarred Expectations from COVID-19

    Edward Knotek II Michael McMain Raphael Schoenle Alexander M Dietrich Kristian Ove R Myrseth Michael Weber


    We examine the evolution of consumers’ expectations for their post-crisis spending on services that have been dramatically curtailed by the pandemic: visiting restaurants, bars, and hotels, using public transportation, and attending crowded events. While most groups now plan to return to their previous spending on these services, higher-income individuals expect to sharply increase their use of these services, but older Americans expect to lower theirs.  Read More

Inflation-Related Working Papers

Working papers are preliminary versions of technical papers containing the results and discussions of current research.

  • WP 21-12 | Censored Density Forecasts: Production and Evaluation

    James Mitchell Martin Weale


    This paper develops methods for the production and evaluation of censored density forecasts. Censored density forecasts quantify forecast risks in a middle region of the density covering a specified probability, and ignore the magnitude but not the frequency of outlying observations. We propose a new estimator that fits a potentially skewed and fat-tailed density to the inner observations, acknowledging that the outlying observations may be drawn from a different but unknown distribution. We also introduce a new test for calibration of censored density forecasts. An application using historical forecast errors from the Federal Reserve Board and the Monetary Policy Committee at the Bank of England illustrates the utility of censored density forecasts when quantifying forecast risks after shocks such as the global financial crisis and the COVID-19 pandemic.  Read More

  • WP 21-10 | Is It Time to Reassess the Focal Role of Core PCE Inflation?

    Randal J Verbrugge


    Core PCE inflation was designed to extract the trend in inflation from the overall PCE price index by removing transitory price changes. This paper compares core PCE inflation to trimmed mean and median PCE inflation and concludes that, for the purpose of monetary policy deliberations and communication, the latter two measures do a better job.  Read More

  • WP 20-22R | Late Payment Fees and Nonpayment in Rental Markets, and Implications for Inflation Measurement: Theoretical Considerations and Evidence

    Wesley Janson Randal J Verbrugge

    Original Paper: WP 20-22


    Statistical agencies track rental expenditures for use in the national accounts and in consumer price indexes (CPIs). As such, statistical agencies should include late payment fees and nonpayment in rent. In the US context, late payment fees are excluded from the CPI. Ostensibly, nonpayment of rent is included in the US CPI; but its treatment is deficient, and we demonstrate that small variations in nonpayment could lead to large swings in shelter inflation, and might have played a role in the 2009 measured shelter inflation collapse. They didn’t: while the national nonpayment incidence is 2-3 percent, in the 1 million plus rent observations in BLS rent microdata from 2000-2016, no nonpayment is recorded. A back-of-the-envelope calculation suggests that, assuming nonpayment undermeasurement continued after 2016, CPI shelter inflation may have been overestimated by about 1 percentage point per month (annualized) in 2020. Late fees and nonpayment are difficult to measure in real time. We offer implementation suggestions that are consistent with CPI procedures.  Read More