Thai Inflation Dynamics: A View from Micro CPI Data∗ Tosapol Apaitan Piti Disyatat Pym Manopimoke Puey Ungphakorn Institute for Economic Research Bank of Thailandy Abstract This paper utilizes disaggregated prices at the micro level to examine the patterns of price adjustment in Thailand. Among the key stylized facts, we found that the frequency of prices changes are generally low, price decreases are common, the size of price changes are large relative to the inflation rate, and there is significant dispersion in price levels as well as in the synchronicity of price changes across regions. Exploiting the richness of price changes at the goods-level, we conduct dynamic factor analyses to better understand the underlying sources of heterogeneous price movements, highlighting the importance of relative price changes in driving the bulk of overall CPI movements. Implications for monetary policy are drawn. Keywords: Factor model, inflation, price rigidity, price setting, relative prices, Phillips curve. JEL Classifications: C40, C25, D40, E31. ∗We are grateful to the participants at the Puey Ungphakorn Institute for Economic Research Seminar at the Bank of Thailand and discussion session at the Ministry of Commerce of Thailand for useful information and comments. Thanks to Chonnakan Rittinon and Vorada Limjaroenrat for excellent research assistance. The opinions expressed in this paper are those of the authors and should not be attributed to the Puey Ungphakorn Institute for Economic Research or the Bank of Thailand. yAddress: 273 Samsen Road, Wat Samphraya, Phra Nakhon, Bangkok 10200, Thai- land. E-mail: Apaitan (
[email protected]), Disyatat (
[email protected]), Manopimoke (
[email protected]).