Advanced Search
MyIDEAS: Login to save this paper or follow this series

Underlying Inflation in Australia: Are the Existing Measures Satisfactory?

Contents:

Author Info

  • Robert Dixon
  • Guay Lim

Abstract

Along with a number of other central banks around the world the Reserve Bank of Australia has quite explicitly adopted an inflation target. Both the Bank and the Australian Government’s statistical agency (the Australian Bureau of Statistics) report various measures of the underlying rate of inflation. The aim of this paper is to formulate criteria which an acceptable underlying rate must satisfy and then test to see whether either individually or in combination any of the current (CPI Excluding volatile items; CPI Market prices excluding volatile items; Weighted median and; Trimmed mean) or recently discarded (the Treasury underlying rate) measures of underlying inflation satisfy these criteria. We find that for the period since inflation targeting began (in 1993) none of these underlying series satisfy all of the criteria we propose but that one series (the RBA’s Trimmed mean series) does satisfy the sub-set which we refer to as our ‘necessary criteria’. We then examine the results of an ‘Unobserved Components’ decomposition and argue that it provides useful information on underlying inflation in Australia. JEL Codes E31, C4 Keywords:

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.economics.unimelb.edu.au/downloads/wpapers-03/878.pdf
Our checks indicate that this address may not be valid because: 404 Not Found (http://www.economics.unimelb.edu.au/downloads/wpapers-03/878.pdf [301 Moved Permanently]--> http://fbe.unimelb.edu.au/economics/downloads/wpapers-03/878.pdf). If this is indeed the case, please notify (Aminata Doumbia)
Download Restriction: no

Bibliographic Info

Paper provided by The University of Melbourne in its series Department of Economics - Working Papers Series with number 878.

as in new window
Length: 41 pages
Date of creation: 2003
Date of revision:
Handle: RePEc:mlb:wpaper:878

Contact details of provider:
Postal: Department of Economics, The University of Melbourne, 4th Floor, FBE Building, Level 4, 111 Barry Street. Victoria, 3010, Australia
Phone: +61 3 8344 5355
Fax: +61 3 8344 6899
Email:
Web page: http://www.economics.unimelb.edu.au
More information through EDIRC

Related research

Keywords: Inflation Monetary Policy Time Series Econometrics;

Other versions of this item:

Find related papers by JEL classification:

References

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.:
as in new window
  1. Carlos Robalo Marques & Pedro Duarte Neves & Luís Morais Sarmento, 2000. "Evaluating Core Inflation Indicators," Working Papers w200003, Banco de Portugal, Economics and Research Department.
  2. Charles Nelson & Eric Zivot, 2000. "Why are Beveridge-Nelson and Unobserved-Component Decompositions of GDP so Different?," Econometric Society World Congress 2000 Contributed Papers 0692, Econometric Society.
  3. Cogley, Timothy, 2002. "A Simple Adaptive Measure of Core Inflation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 34(1), pages 94-113, February.
  4. Peter C.B. Phillips & Sam Ouliaris, 1987. "Asymptotic Properties of Residual Based Tests for Cointegration," Cowles Foundation Discussion Papers 847R, Cowles Foundation for Research in Economics, Yale University, revised Jul 1988.
  5. James C. Morley & Charles R. Nelson & Eric Zivot, 2003. "Why Are the Beveridge-Nelson and Unobserved-Components Decompositions of GDP So Different?," The Review of Economics and Statistics, MIT Press, vol. 85(2), pages 235-243, May.
  6. Guy Debelle, 1997. "Inflation Targeting in Practice," IMF Working Papers 97/35, International Monetary Fund.
  7. Marques, Carlos Robalo & Neves, Pedro Duarte & da Silva, Afonso Goncalves, 2002. "Why should Central Banks avoid the use of the underlying inflation indicator?," Economics Letters, Elsevier, vol. 75(1), pages 17-23, March.
  8. Freeman, Donald G., 1998. "Do core inflation measures help forecast inflation?," Economics Letters, Elsevier, vol. 58(2), pages 143-147, February.
  9. Morley, James C., 2002. "A state-space approach to calculating the Beveridge-Nelson decomposition," Economics Letters, Elsevier, vol. 75(1), pages 123-127, March.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Rachel Holden, 2006. "Measuring core inflation," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 69, pages 7p, December.
  2. Lei Lei Song, 2003. "The Role of the Unit of Analysis in Tax Policy Reform Evaluations," Melbourne Institute Working Paper Series wp2003n29, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
  3. Robert Dixon & David Shepherd, 2006. "The Cyclical Dynamics and Volatility of Australian Output and Employment," Department of Economics - Working Papers Series 968, The University of Melbourne.
  4. Jamie Armour, 2006. "An Evaluation of Core Inflation Measures," Working Papers 06-10, Bank of Canada.
  5. Ivan Roberts, 2005. "Underlying Inflation: Concepts, Measurement and Performance," RBA Research Discussion Papers rdp2005-05, Reserve Bank of Australia.
  6. Lei Lei Song, 2005. "Do underlying measures of inflation outperform headline rates? Evidence from Australian data," Applied Economics, Taylor & Francis Journals, vol. 37(3), pages 339-345.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:mlb:wpaper:878. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Aminata Doumbia).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.