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Measures of Underlying Inflation in Sri Lanka

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Author Info

  • Souvik Gupta
  • Magnus Saxegaard

Abstract

During the first half of 2008, Sri Lanka witnessed significantly higher inflation than most other emerging Asian countries. Inflation has since declined amid declining world commodity prices and tight monetary policy. Given the sensitivity to global commodity prices, a core inflation measure could be useful for monetary policy. The purpose of this paper is to compare the performance of Sri Lanka''s existing official measure of core inflation against alternative measures. Our findings suggest that the existing measure does contain information about the future path of headline information, but may be inadequate as a communication tool for the Central Bank.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 09/167.

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Length: 22
Date of creation: 01 Aug 2009
Date of revision:
Handle: RePEc:imf:imfwpa:09/167

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Related research

Keywords: Central bank policy; Consumer price indexes; Economic models; Performance indicators; Price structures; inflation; monetary policy; central bank; monetary fund; aggregate demand; measure of inflation; price inflation; monetary authorities; inflation targeting; inflation rate; inflationary pressure; relative price; inflationary pressures; monetary phenomenon; real output; money supply; relative prices; price mechanism; price of goods; actual inflation; monetary transmission mechanism; inflation data; monetary transmission; inflation rates; increase in inflation; money growth; inflation target; tight monetary policy; rate of inflation;

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References

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  1. Quah, Danny, 1995. "Measuring Core Inflation," CEPR Discussion Papers 1153, C.E.P.R. Discussion Papers.
  2. Kwiatkowski, D. & Phillips, P.C.B. & Schmidt, P., 1990. "Testing the Null Hypothesis of Stationarity Against the Alternative of Unit Root : How Sure are we that Economic Time Series have a Unit Root?," Papers 8905, Michigan State - Econometrics and Economic Theory.
  3. Michael F. Bryan & Stephen G. Cecchetti, 1993. "The Consumer Price Index as a Measure of Inflation," NBER Working Papers 4505, National Bureau of Economic Research, Inc.
  4. Pedro Duarte Neves & Luís Morais Sarmento & Carlos Robalo Marques, 1999. "Evaluating core inflation indicators," Economic Bulletin and Financial Stability Report Articles, Banco de Portugal, Economics and Research Department.
  5. Tiff Macklem, 2001. "A New Measure of Core Inflation," Bank of Canada Review, Bank of Canada, vol. 2001(Autumn), pages 3-12.
  6. Wynne, Mark A., 1999. "Core inflation: a review of some conceptual issues," Working Paper Series 0005, European Central Bank.
  7. Mick Silver, 2007. "Core Inflation: Measurement and Statistical Issues in Choosing Among Alternative Measures," IMF Staff Papers, Palgrave Macmillan, vol. 54(1), pages 163-190, May.
  8. Freeman, Donald G., 1998. "Do core inflation measures help forecast inflation?," Economics Letters, Elsevier, vol. 58(2), pages 143-147, February.
  9. Edimon Ginting, 2007. "Is Inflation in India An Attractor of Inflation in Nepal?," IMF Working Papers 07/269, International Monetary Fund.
  10. Thérèse Laflèche, 1997. "Statistical measures of the trend rate of inflation," Bank of Canada Review, Bank of Canada, vol. 1997(Autumn), pages 29-47.
  11. Danny Quah & Danny Quah & Shaun P. Vahey, 1995. "Measuring Core Inflation," CEP Discussion Papers dp0254, Centre for Economic Performance, LSE.
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Cited by:
  1. Hanif, M. Nadim & Malik, Muhammad Jahanzeb & Iqbal, Javed, 2012. "Intrinsic Inflation Persistence in a Developing Country," MPRA Paper 39583, University Library of Munich, Germany.

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