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Performance of core inflation measures

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  • C.K. Folkertsma
  • K. Hubrich

Abstract

This paper assesses the performance of core inflation measures based on the structural VAR approach. Since core or monetary inflation is not directly observable, we develop a monetary general equilibrium model that fits real aggregated European data and use this model to generate time series for headline as well as core inflation. For five different schemes which attempt to identify core inflation within a VAR framework it is investigated whether the estimated core inflation series recover the true series sufficiently precise in order to be useful for monetary policy.

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File URL: http://www.dnb.nl/binaries/sr063_tcm46-146840.pdf
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Bibliographic Info

Paper provided by Netherlands Central Bank in its series DNB Staff Reports (discontinued) with number 63.

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Length: 55 pages
Date of creation: 2001
Date of revision:
Handle: RePEc:dnb:staffs:63

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Keywords: SVAR-models; core inflation; stochastic general equilibrium model; Monte-Carlo simulation;

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References

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Citations

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Cited by:
  1. Mick Silver, 2006. "Core Inflation Measures and Statistical Issues in Choosing Among them," IMF Working Papers 06/97, International Monetary Fund.
  2. Emil Stavrev, 2010. "Measures of underlying inflation in the euro area: assessment and role for informing monetary policy," Empirical Economics, Springer, vol. 38(1), pages 217-239, February.
  3. Alan Mankikar & Jo Paisley, 2004. "Core inflation: a critical guide," Bank of England working papers 242, Bank of England.
  4. Cristadoro, Riccardo & Forni, Mario & Reichlin, Lucrezia & Veronese, Giovanni, 2001. "A Core Inflation Index for the Euro Area," CEPR Discussion Papers 3097, C.E.P.R. Discussion Papers.
  5. Emil Stavrev, 2006. "Measures of Underlying Inflation in the Euro Area," IMF Working Papers 06/197, International Monetary Fund.
  6. Nicholas Apergis & Stephen M. Miller & Alexandros Panethimitakis & Athanassios Vamvakidis, 2005. "Inflation Targeting and Output Growth: Evidence from Aggregate European Data," Working papers 2005-06, University of Connecticut, Department of Economics.
  7. International Monetary Fund, 2005. "Inflation Targeting and Output Growth," IMF Working Papers 05/89, International Monetary Fund.
  8. Joanne Cutler, 2001. "Core Inflation in the UK," Discussion Papers 03, Monetary Policy Committee Unit, Bank of England.
  9. Jamie Armour, 2006. "An Evaluation of Core Inflation Measures," Working Papers 06-10, Bank of Canada.
  10. Alan K. Detmeister, 2011. "The usefulness of core PCE inflation measures," Finance and Economics Discussion Series 2011-56, Board of Governors of the Federal Reserve System (U.S.).

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