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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. L.J. Álvarez & M de los Llanos Matea, 2001. "Underlying Inflation Measures in Spain," DNB Staff Reports (discontinued), Netherlands Central Bank 60, Netherlands Central Bank.
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