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Evaluating core inflation indicators

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  • Robalo Marques, Carlos
  • Duarte Neves, Pedro
  • Morais Sarmento, Luis

Abstract

This paper proposes testable conditions that core inflation measures should satisfy. Trend inflation indicators calculated by Banco de Portugal are tested against this background. The major conclusion is that the so-called “underlying inflation”, the “10% trimmed mean”, and the “25% trimmed mean” do not meet the proposed conditions. However, they are satisfied by the “37-month centred moving average”, the “first principal component” and the “standard deviation weighted CPI” indicators. Yet, only the last two indicators can be used as useful core inflation measures, as the first one is not computable in real time.

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Bibliographic Info

Article provided by Elsevier in its journal Economic Modelling.

Volume (Year): 20 (2003)
Issue (Month): 4 (July)
Pages: 765-775

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Handle: RePEc:eee:ecmode:v:20:y:2003:i:4:p:765-775

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Web page: http://www.elsevier.com/locate/inca/30411

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References

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  1. Mark A. Wynne, 1999. "Core inflation: a review of some conceptual issues," Working Papers 9903, Federal Reserve Bank of Dallas.
  2. Quah, Danny, 1995. "Measuring Core Inflation," CEPR Discussion Papers 1153, C.E.P.R. Discussion Papers.
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  10. Carlos Robalo Marques & Pedro Duarte Neves & Luís Morais Sarmento, 2000. "Evaluating Core Inflation Indicators," Working Papers w200003, Banco de Portugal, Economics and Research Department.
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  17. Freeman, Donald G., 1998. "Do core inflation measures help forecast inflation?," Economics Letters, Elsevier, vol. 58(2), pages 143-147, February.
  18. אסתר טולידנו, 1995. "מקבלי דמי אבטלה בשנת 1994," Working Papers 444, National Insurance Institute of Israel.
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