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US-Euro Area Price Level and Inflation Differentials: I(0), I(1), Segmented Trends?
Do you calculate inflation differentials using … inflation or price levels? Follow up on this debate from a bit over a year ago. Here’s a time series plot of the log ratio of US CPI to Euro Area 19 HICP (seasonally adjusted by author using X13) (blue line, left scale), and month-on-month inflation differential annualized (tan line, right scale). chart Figure 1: Log ratio of US CPI-all urban to Euro Area 19 HICP (blue line, left scale), and month-on-month annualized inflation differential, in % (tan line, right scale). HICP seasonally adjusted using X13 log transform, X11 ARIMA seasonal adjustment. Inflation ... (full story)