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Why should Central Banks avoid the use of the underlying inflation indicator?

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  • Marques, Carlos Robalo
  • Neves, Pedro Duarte
  • da Silva, Afonso Goncalves

Abstract

This paper assesses the usefulness of the commonly used underlying inflation indicator, in light of the criteria proposed in Marques et al. (2000). Empirical evidence for a group of six countries strongly suggets that the use of underlying inflation as an indicator of trend inflation should be avoided.

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Bibliographic Info

Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 75 (2002)
Issue (Month): 1 (March)
Pages: 17-23

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Handle: RePEc:eee:ecolet:v:75:y:2002:i:1:p:17-23

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References

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  1. Carlos Robalo Marques & Pedro Duarte Neves & Luís Morais Sarmento, 2000. "Evaluating Core Inflation Indicators," Working Papers, Banco de Portugal, Economics and Research Department w200003, Banco de Portugal, Economics and Research Department.
  2. Michael F. Bryan & Stephen G. Cecchetti, 1994. "Measuring Core Inflation," NBER Chapters, in: Monetary Policy, pages 195-219 National Bureau of Economic Research, Inc.
  3. Alan S. Blinder, 1982. "The Anatomy of Double-Digit Inflation in the 1970s," NBER Chapters, in: Inflation: Causes and Effects, pages 261-282 National Bureau of Economic Research, Inc.
  4. Freeman, Donald G., 1998. "Do core inflation measures help forecast inflation?," Economics Letters, Elsevier, Elsevier, vol. 58(2), pages 143-147, February.
  5. Luis J. Álvarez & María de los Llanos Matea, 1999. "Underlying Inflation Measures in Spain," Banco de Espa�a Working Papers 9911, Banco de Espa�a.
  6. Michael F. Bryan & Stephen G. Cecchetti & Rodney L. Wiggins II, 1997. "Efficient Inflation Estimation," NBER Working Papers 6183, National Bureau of Economic Research, Inc.
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Cited by:
  1. David Baqaee, 2009. "Using wavelets to measure core inflation: the case in New Zealand," Reserve Bank of New Zealand Discussion Paper Series DP2009/05, Reserve Bank of New Zealand.
  2. Ribba, Antonio, 2003. "Permanent-transitory decompositions and traditional measures of core inflation," Economics Letters, Elsevier, Elsevier, vol. 81(1), pages 109-116, October.
  3. Durai, S. Raja Sethu & Ramachandran, M., 2007. "Core inflation for India," Journal of Asian Economics, Elsevier, vol. 18(2), pages 365-383, April.
  4. Scott Roger & Mark R. Stone, 2005. "On Target? the International Experience with Achieving Inflation Targets," IMF Working Papers 05/163, International Monetary Fund.
  5. Maria Arrazola & Jose de Hevia, 2008. "A simple inflation indicator for the euro zone," Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 40(18), pages 2387-2394.
  6. Robert Dixon & Guay Lim, 2003. "Underlying Inflation in Australia: Are the Existing Measures Satisfactory?," Department of Economics - Working Papers Series, The University of Melbourne 878, The University of Melbourne.
  7. Belbute, José Manuel, 2013. "Is the Euro-Area core price index really more persistent than the food and energy price indexes?," Research in Economics, Elsevier, Elsevier, vol. 67(4), pages 307-315.
  8. Jamie Armour, 2006. "An Evaluation of Core Inflation Measures," Working Papers, Bank of Canada 06-10, Bank of Canada.
  9. Ivan Roberts, 2005. "Underlying Inflation: Concepts, Measurement and Performance," RBA Research Discussion Papers, Reserve Bank of Australia rdp2005-05, Reserve Bank of Australia.

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