"A cross-sectional analysis of individual goods inflation rates"

Abstract :

We define the individual excess inflation rate (IEIR) for a consumer good as its individual inflation rate (IIR) minus the general inflation rate. We document sizeable cross-sectional heterogeneity in IEIR for goods and services, which we explain by the heterogeneity in IEIR’s exposure to a set of economic factors capturing common sources of price variation. The empirical findings are significant and robust, confirming our argument that goods with countercyclical price fluctuations generally have higher IEIR and vice versa. This contrasts with findings from financial assets and reveals divergent underlying logics that lead to different investment and consumption behaviors.