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Core inflation: a review of some conceptual issues

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Author Info
Mark A. Wynne () (Federal Reserve Bank of Dallas)

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Abstract

This paper reviews various approaches to the measurement of core inflation that have been proposed in recent years. The objective is to determine whether the ECB should pay special attention to one or other of these measures in assessing inflation developments in the euro area. I put particular emphasis on the conceptual and practical problems that arise in the measurement of core inflation, and propose some criteria that could be used by the ECB to choose a core inflation measure.

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Publisher Info
Paper provided by European Central Bank in its series Working Paper Series with number 5.

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Length: 26 pages
Date of creation: May 1999
Date of revision:
Handle: RePEc:ecb:ecbwps:19990005

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Related research
Keywords: Core inflation; monetary policy; inflation measurement; trimmed mean; weighted median; SVAR; Edgeworth index;

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Find related papers by JEL classification:
C8 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs
E0 - Macroeconomics and Monetary Economics - - General
E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

References listed on IDEAS
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  1. Shiratsuka, Shigenori, 1997. "Inflation Measures for Monetary Policy: Measuring the Underlying Inflation Trend and Its Implication for Monetary Policy Implementation," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 15(2), pages 1-26, December. [Downloadable!]
  2. Mark A. Wynne, 1997. "Measuring short-run inflation for central bankers - commentary," Review, Federal Reserve Bank of St. Louis, issue May, pages 161-167. [Downloadable!]
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    Other versions:
  4. Michael F. Bryan & Stephen G. Cecchetti, 1994. "Measuring Core Inflation," NBER Chapters, in: Monetary Policy, pages 195-219 National Bureau of Economic Research, Inc. [Downloadable!]
    Other versions:
  5. 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)
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  6. Alan S. Blinder, 1997. "Measuring short-run inflation for central bankers - commentary," Review, Federal Reserve Bank of St. Louis, issue May, pages 157-160. [Downloadable!]
  7. Apel, Mikael & Jansson, Per, 1999. "A Parametric Approach for Estimating Core Inflation and Interpreting the Inflation Process," Working Paper Series 80, Sveriges Riksbank (Central Bank of Sweden).
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  12. D. J. E. Baestaens, 1997. "Comment," European Journal of Finance, Taylor and Francis Journals, vol. 3(3), pages 203-224, September. [Downloadable!] (restricted)
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    Other versions:
  14. Diewert, W.E. & Fox, K.J., 1998. "The Measurement of Inflation After Tax Reform," UBC Departmental Archives 98-05, UBC Department of Economics.
    Other versions:
  15. Clements, Kenneth W & Izan, H Y, 1987. "The Measurement of Inflation: A Stochastic Approach," Journal of Business & Economic Statistics, American Statistical Association, vol. 5(3), pages 339-50, July.
  16. S. Rao Aiyagari, 1990. "Deflating the case for zero inflation," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Sum, pages 2-11. [Downloadable!]
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    Other versions:
  19. Alan S. Blinder, 1980. "The Consumer Price Index and the Measurement of Recent Inflation," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 11(1980-2), pages 539-573. [Downloadable!]
  20. Stanley Fischer & Franco Modigliani, 1978. "Towards an understanding of the real effects and costs of inflation," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 114(4), pages 810-833, December. [Downloadable!] (restricted)
    Other versions:
  21. Diewert, W.E., 1995. "On the Stochastic Approach to Index Numbers," UBC Departmental Archives 95-31, UBC Department of Economics.
  22. Michael F. Bryan & Christopher J. Pike, 1991. "Median price changes: an alternative approach to measuring current monetary inflation," Economic Commentary, Federal Reserve Bank of Cleveland, issue Dec 1. [Downloadable!]
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  24. Jon Faust & Eric M. Leeper, 1994. "When do long-run identifying restrictions give reliable results?," Working Paper 94-2, Federal Reserve Bank of Atlanta.
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  25. Hasan Bakhshi & Tony Yates, . "To trim or not to trim? An application of a trimmmed mean inflation estimator to the United Kingdom," Bank of England working papers 97, Bank of England. [Downloadable!]
  26. Clements, Kenneth W & Izan, H Y, 1981. "A Note on Estimating Divisia Index Numbers," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 22(3), pages 745-47, October. [Downloadable!] (restricted)
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  29. Balke, Nathan S. & Wynne, Mark A., 2000. "An equilibrium analysis of relative price changes and aggregate inflation," Journal of Monetary Economics, Elsevier, vol. 45(2), pages 269-292, April. [Downloadable!] (restricted)
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  30. Vining, Daniel R, Jr & Elwertowski, Thomas C, 1976. "The Relationship between Relative Prices and the General Price Level," American Economic Review, American Economic Association, vol. 66(4), pages 699-708, September. [Downloadable!] (restricted)
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  33. repec:wop:imespe:9707 is not listed on IDEAS
  34. Cooley, Thomas F. & Dwyer, Mark, 1998. "Business cycle analysis without much theory A look at structural VARs," Journal of Econometrics, Elsevier, vol. 83(1-2), pages 57-88. [Downloadable!] (restricted)
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    Other versions:
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