Applying the concept of underlying inflation can be thought of as an attempt to capture the general trend in inflation more accurately than with readily available data on headline inflation. In this paper a number of approaches to the analysis of underlying inflation are examined from a unifying standpoint, stressing their complementary nature, and empirical results are presented for the Spanish economy. Different measures differ from each other in the information set which is considered to be relevant for estimating the underlying rate of inflation. We first examine the simplest of the procedures that amounts to ignoring price developments in the most volatile sub-components of the CPI and then consider limited-influence estimators that take advantage of the information contained in the cross-sectional distribution of individual prices. Statistical methods of extracting the trend component of inflation are also discussed. Finally, measures that allow for the interplay of other economic variables are considered.
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Find related papers by JEL classification: C4 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
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Michael F. Bryan & Stephen G. Cecchetti, 1993.
"Measuring Core Inflation,"
NBER Working Papers
4303, National Bureau of Economic Research, Inc.
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Michael F. Bryan & Stephen G. Cecchetti, 1994.
"Measuring Core Inflation,"
NBER Chapters,
in: Monetary Policy, pages 195-219
National Bureau of Economic Research, Inc.
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Cited by: (explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)
Luc Aucremanne & Guy Brys & Peter J Rousseeuw & Anja Struyf & Mia Hubert, 2003.
"Inflation, relative prices and nominal rigidities,"
BIS Papers chapters,
in: Bank for International Settlements (ed.), Monetary policy in a changing environment, volume 19, pages 81-105
Bank for International Settlements.
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