Measures of Trend Inflation in Hong Kong
AbstractThe 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.
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Bibliographic InfoPaper provided by Hong Kong Monetary Authority in its series Working Papers with number 0907.
Length: 31 pages
Date of creation: Apr 2009
Date of revision:
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Core inflation; trend inflation; co-integration;
Other versions of this item:
- Frank Leung & Kevin Chow & Simon Chan, 2010. "Measures of trend inflation in Hong Kong," BIS Papers chapters, Bank for International Settlements, in: Bank for International Settlements (ed.), Monetary policy and the measurement of inflation: prices, wages and expectations, volume 49, pages 177-200 Bank for International Settlements.
- E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
- E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models &bull Diffusion Processes
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-06-03 (All new papers)
- NEP-CBA-2009-06-03 (Central Banking)
- NEP-MAC-2009-06-03 (Macroeconomics)
- NEP-MON-2009-06-03 (Monetary Economics)
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