The evolving inflation process

This paper reviews analytical work carried out by central banks that participated in the Autumn Meeting of Central Bank Economists on "The evolving inflation process" which the BIS hosted on 28-29 October 2005. The paper first discusses efforts to document the univariate statistical properties of inflation and how they have changed over the last decades. It then reviews studies of disaggregated or micro inflation data and evidence from surveys of firms concerning their pricing behaviour. Using this micro evidence as background, the paper also attempts to understand the proximate causes for any changes in the inflation process, such as disparities in the price behaviour of tradables and non-tradables or movements in energy prices. The paper then summarises central bank research on changes in the ultimate determinants of factors impinging on the inflation process, for example a changing monetary policy regime, increased globalisation or a legislative reform of the labour market.