Comparing measures of core inflation

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Comparing measures of core inflation

Author Info

Todd E. Clark

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Todd Clark

Abstract

Although many policymakers and analysts associate “core CPI inflation” with the CPI excluding food and energy, there are other measures of core consumer price inflation. Like the CPI excluding food and energy, these other measures typically attempt to identify the underlying trend in CPI inflation by excluding certain components subject to large relative price changes. The rationale is that unusual changes, such as the 14.2 percent increase in energy prices last year (December to December) or the 18 percent jump in tobacco prices from November to December 1998, are unlikely to be related to the underlying trend in CPI inflation.> Clark compares five different measures of core CPI inflation. He reviews the concepts underlying the idea of core inflation and the measures examined in the article. Three of the core measures have been developed in previous research, while two indicators are developed in the article. Next, he evaluates the core inflation measures by three different criteria: accuracy in tracking trend inflation, predictive content for future overall inflation, and complexity.

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Publisher Info
Article provided by Federal Reserve Bank of Kansas City in its journal Economic Review.

Volume (Year): (2001)
Issue (Month): Q II ()
Pages: 5-31
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Handle: RePEc:fip:fedker:y:2001:i:qii:p:5-31:n:v.86no.2

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Cited by:
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Jamie Armour, 2006. "An Evaluation of Core Inflation Measures," Working Papers 06-10, Bank of Canada. [Downloadable!]
Linda S. Goldberg & Michael W. Klein, 2007. "Establishing Credibility: Evolving Perceptions of the European Central Bank," The Institute for International Integration Studies Discussion Paper Series iiisdp194, IIIS. [Downloadable!]
Other versions:
- Linda S. Goldberg & Michael W. Klein, 2005. "Establishing Credibility: Evolving Perceptions of the European Central Bank," NBER Working Papers 11792, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
- Linda S. Goldberg & Michael W. Klein, 2005. "Establishing Credibility: Evolving Perceptions of the European Central Bank," The Institute for International Integration Studies Discussion Paper Series iiisdp105, IIIS. [Downloadable!]
- Linda S. Goldberg & Michael W. Klein, 2005. "Establishing credibility: evolving perceptions of the European Central Bank," Staff Reports 231, Federal Reserve Bank of New York. [Downloadable!]
Robert Rich & Charles Steindel, 2007. "A comparison of measures of core inflation," Economic Policy Review, Federal Reserve Bank of New York, issue Dec, pages 19-38. [Downloadable!]
Mark A. Wynne, 2008. "Core inflation: a review of some conceptual issues," Review, Federal Reserve Bank of St. Louis, issue May, pages 205-228. [Downloadable!]
Other versions:
- Mark A. Wynne, 1999. "Core inflation: a review of some conceptual issues," Working Paper Series 5, European Central Bank. [Downloadable!]
- Mark A. Wynne, 1999. "Core inflation: a review of some conceptual issues," Working Papers 99-03, Federal Reserve Bank of Dallas. [Downloadable!]
Robert Rich & Charles Steindel, 2005. "A review of core inflation and an evaluation of its measures," Staff Reports 236, Federal Reserve Bank of New York. [Downloadable!]

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