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Evaluating Core Inflation Indicators

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  • Carlos Robalo Marques
  • Pedro Duarte Neves
  • Luís Morais Sarmento

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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Bibliographic Info

Paper provided by Banco de Portugal, Economics and Research Department in its series Working Papers with number w200003.

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Date of creation: 2000
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Handle: RePEc:ptu:wpaper:w200003

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  1. Mark A. Wynne, 1999. "Core inflation: a review of some conceptual issues," Working Papers 9903, Federal Reserve Bank of Dallas.
  2. Christine Gartner & Gert Wehinger, 1998. "Core Inflation in Selected European Union Countries," Working Papers 33, Oesterreichische Nationalbank (Austrian Central Bank).
  3. דר עמנואל חיגר, 1999. "חינוך מיני לנוער חרש," Working Papers 178, National Insurance Institute of Israel.
  4. 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.
  5. Stephen G. Cecchetti, 1996. "Measuring Short-Run Inflation for Central Bankers," NBER Working Papers 5786, National Bureau of Economic Research, Inc.
  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.
  7. חנה וייל, 1995. "סיעוד במגזר הערבי," Working Papers 397, National Insurance Institute of Israel.
  8. Danny Quah & Shaun Vahey, 1995. "Measuring Core Inflation," Bank of England working papers 31, Bank of England.
  9. Le Bihan, Herve & Sedillot, Franck, 2000. "Do core inflation measures help forecast inflation?: Out-of-sample evidence from French data," Economics Letters, Elsevier, vol. 69(3), pages 261-266, December.
  10. Michael F. Bryan & Stephen G. Cecchetti, 1994. "Measuring Core Inflation," NBER Chapters, in: Monetary Policy, pages 195-219 National Bureau of Economic Research, Inc.
  11. דר אברהם כרמלי & גב נעמה שמיר וגב לילי יצחקי, 1999. "מתחברים לנוער מנותק," Working Papers 191, National Insurance Institute of Israel.
  12. 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.
  13. אסתר טולדנו, 1997. "מקבלי דמי אבטלה בשנת 1996," Working Papers 521, National Insurance Institute of Israel.
  14. אסתר טולידנו, 1995. "מקבלי דמי אבטלה בשנת 1994," Working Papers 444, National Insurance Institute of Israel.
  15. James H. Stock & Mark W. Watson, 1999. "Forecasting Inflation," NBER Working Papers 7023, National Bureau of Economic Research, Inc.
  16. L.J. Álvarez & M de los Llanos Matea, 2001. "Underlying Inflation Measures in Spain," DNB Staff Reports (discontinued) 60, Netherlands Central Bank.
  17. Fischer, Andreas M, 1989. "Unit Roots and Survey Data," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 51(4), pages 451-63, November.
  18. Freeman, Donald G., 1998. "Do core inflation measures help forecast inflation?," Economics Letters, Elsevier, vol. 58(2), pages 143-147, February.
  19. אסתר טולידנו, 1999. "מקבלי דמי אבטלה בשנת 1998," Working Papers 385, National Insurance Institute of Israel.
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