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Evaluating Core Inflation

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Author Info
C.R. Marques
P.D. Neves
L.M. Sarmento

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Abstract

This paper proposes testable conditions that core inflation measures should satisfy. Trend inflation indicators calculated by Banco de Portugal are tested against this background. The major conclusion is that the so-called "underlying inflation", the "10% trimmed mean", and the "25% trimmed mean" do not meet the proposed conditions. However, they are satisfied by the "37-month centred moving average", the "first principal component" and the "standard deviation weighted CPI" indicators. Yet, only the last two indicators can be used as useful core inflation measures, as the first one is not computable in real time.

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File URL: http://www.dnb.nl/binaries/sr066_tcm46-146843.pdf
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Publisher Info
Paper provided by Netherlands Central Bank in its series DNB Staff Reports (discontinued) with number 66.

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Length: 20 pages
Date of creation: 2001
Date of revision:
Handle: RePEc:dnb:staffs:66

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Related research
Keywords: core inflation measures; trimmed mean;

Find related papers by JEL classification:
E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
C4 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics

References listed on IDEAS
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.:

  1. Mark A. Wynne, 1999. "Core inflation: a review of some conceptual issues," Working Paper Series 5, European Central Bank. [Downloadable!]
    Other versions:
  2. Michael F. Bryan & Stephen G. Cecchetti & Rodney L. Wiggins II, 1997. "Efficient Inflation Estimation," NBER Working Papers 6183, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  3. Engle, Robert F & Granger, Clive W J, 1987. "Co-integration and Error Correction: Representation, Estimation, and Testing," Econometrica, Econometric Society, vol. 55(2), pages 251-76, March. [Downloadable!] (restricted)
  4. Michael F. Bryan & Stephen G. Cecchetti, 1993. "Measuring Core Inflation," NBER Working Papers 4303, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  5. Stephen G. Cecchetti, 1997. "Measuring short-run inflation for central bankers," Review, Federal Reserve Bank of St. Louis, issue May, pages 143-155. [Downloadable!]
    Other versions:
  6. Thérèse Laflèche, 1997. "Statistical measures of the trend rate of inflation," Bank of Canada Review, Bank of Canada, vol. 1997(Autumn), pages 29-47. [Downloadable!]
  7. Freeman, Donald G., 1998. "Do core inflation measures help forecast inflation?," Economics Letters, Elsevier, vol. 58(2), pages 143-147, February. [Downloadable!] (restricted)
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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.)

  1. Mick Silver, 2006. "Core Inflation Measures and Statistical Issues in Choosing Among Them," IMF Working Papers 06/97, International Monetary Fund. [Downloadable!]
  2. Alan Mankikar & Jo Paisley, . "Core inflation: a critical guide," Bank of England working papers 242, Bank of England. [Downloadable!]
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This page was last updated on 2009-12-6.

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