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Measures of trend inflation in Hong Kong

In: Monetary policy and the measurement of inflation: prices, wages and expectations

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Author Info

  • Frank Leung

    (Hong Kong Monetary Authority)

  • Kevin Chow

    (Hong Kong Monetary Authority)

  • Simon Chan

    (Hong Kong Monetary Authority)

Abstract

The concept of trend inflation is crucial for macroeconomic analysis and policy formulation by central banks. In this paper, we compare measures of trend inflation in Hong Kong estimated by the exclusion and statistical methods. Our findings suggest that the trend inflation estimated by the exclusion method (by excluding basic food, energy and other volatile items) and the principal component technique have strong predictive power on future changes in headline CPI or PCE inflation. Evaluation results based on qualitative and quantitative criteria suggest that the two estimation methods have their own strengths and weaknesses, and none of the methods has clear absolute advantage over the other for measuring trend inflation.

(This abstract was borrowed from another version of this item.)

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This chapter was published in:

  • Bank for International Settlements, 2010. "Monetary policy and the measurement of inflation: prices, wages and expectations," BIS Papers, Bank for International Settlements, number 49, 6.
    This item is provided by Bank for International Settlements in its series BIS Papers chapters with number 49-10.

    Handle: RePEc:bis:bisbpc:49-10

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