Design and Evaluation of Core Inflation Measures for Turkey
AbstractThis study analyzes core inflation concept for Turkey from the perspective of design and evaluation. To our best knowledge, this is the first study to evaluate the performance of the core inflation measures for Turkey. We first define and calculate new core inflation indicators using the disaggregated price data for the time period of January 1994 to June 2007. The core inflation measures developed in this paper include weighted median, trimmed mean and volatility-based measures along with the permanent exclusion-based methods. Later, we evaluate the performance of the core inflation measures with regards to pre-defined criteria including unbiasedness, reduced volatility, trend tracking ability and predictive ability. Considering the significant shift in the inflation process in Turkey, we split the sample into two as pre- and post-2003 when evaluating the performance of the core inflation measures. Overall, no single core inflation indicator stands out alone as “the core” and therefore different core measures should be followed simultaneously to get a better understanding of the real trend of inflation and to identify various shocks hitting the inflation. However, limited influence estimators and volatility-based core measures perform relatively better compared to permanent exclusion-based methods. The study also provides an extensive analysis of the distribution of price changes at various aggregation levels.
Download InfoIf 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.
Bibliographic InfoPaper provided by Research and Monetary Policy Department, Central Bank of the Republic of Turkey in its series Working Papers with number 0903.
Date of creation: 2009
Date of revision:
Contact details of provider:
Postal: Head Office, Istiklal Cad. 10 Ulus, 06100 Ankara
Phone: (90 312) 507 5000
Fax: (90 312) 507 5640
Web page: http://www.tcmb.gov.tr
More information through EDIRC
Inflation; core inflation; Turkey;
Find related papers by JEL classification:
- C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models &bull Diffusion Processes
- C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
- E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-04-18 (All new papers)
- NEP-ARA-2009-04-18 (MENA - Middle East & North Africa)
- NEP-CBA-2009-04-18 (Central Banking)
- NEP-CWA-2009-04-18 (Central & Western Asia)
- NEP-MAC-2009-04-18 (Macroeconomics)
- NEP-MON-2009-04-18 (Monetary Economics)
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.:
- Domenico Giannone & Troy D. Matheson, 2007.
"A New Core Inflation Indicator for New Zealand,"
International Journal of Central Banking,
International Journal of Central Banking, vol. 3(4), pages 145-180, December.
- Domenico Giannone & Troy Matheson, 2006. "A new core inflation indicator for New Zealand," Reserve Bank of New Zealand Discussion Paper Series DP2006/02, Reserve Bank of New Zealand.
- Giannone, Domenico & Matheson, Troy, 2007. "A New Core Inflation Indicator for New Zealand," CEPR Discussion Papers 6469, C.E.P.R. Discussion Papers.
- Domenico Giannone & Troy Matheson, 2007. "A new core inflation indicator for New Zealand," ULB Institutional Repository 2013/6407, ULB -- Universite Libre de Bruxelles.
- Thérèse Laf;èche & Jamie Armour, 2006. "Evaluating Measures of Core Inflation," Bank of Canada Review, Bank of Canada, vol. 2006(Summer), pages 19-29.
- Scott Roger, 1998. "Core inflation: concepts, uses and measurement," Reserve Bank of New Zealand Discussion Paper Series G98/9, Reserve Bank of New Zealand.
- Laurence Ball & N. Gregory Mankiw, 1994.
"Asymmetric Price Adjustment and Economic Fluctuations,"
NBER Working Papers
4089, National Bureau of Economic Research, Inc.
- Ball, Laurence & Mankiw, N Gregory, 1994. "Asymmetric Price Adjustment and Economic Fluctuations," Economic Journal, Royal Economic Society, vol. 104(423), pages 247-61, March.
- Ball, L. & Mankiw, N.G., 1992. "Asymmetric Price Adjustment and Economic Fluctuations," Harvard Institute of Economic Research Working Papers 1602, Harvard - Institute of Economic Research.
- Todd E. Clark, 2001. "Comparing measures of core inflation," Economic Review, Federal Reserve Bank of Kansas City, issue Q II, pages 5-31.
- François R. Velde, 2006. "An alternative measure of inflation," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q I, pages 56-65.
- Michael F. Bryan & Stephen G. Cecchetti, 1993.
"Measuring Core Inflation,"
NBER Working Papers
4303, National Bureau of Economic Research, Inc.
- Julie Smith, 2005. "Inflation targeting and core inflation," Canadian Journal of Economics, Canadian Economics Association, vol. 38(3), pages 1018-1036, August.
- Carlos Robalo Marques & Pedro Duarte Neves & Luís Morais Sarmento, 2000.
"Evaluating Core Inflation Indicators,"
w200003, Banco de Portugal, Economics and Research Department.
- 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.
- Robalo Marques, Carlos & Duarte Neves, Pedro & Morais Sarmento, Luis, 2003. "Evaluating core inflation indicators," Economic Modelling, Elsevier, vol. 20(4), pages 765-775, July.
- Jamie Armour, 2006. "An Evaluation of Core Inflation Measures," Working Papers 06-10, Bank of Canada.
- Thérèse Laflèche, 1997. "Statistical measures of the trend rate of inflation," Bank of Canada Review, Bank of Canada, vol. 1997(Autumn), pages 29-47.
- Cristadoro, Riccardo & Forni, Mario & Reichlin, Lucrezia & Veronese, Giovanni, 2005.
"A Core Inflation Indicator for the Euro Area,"
Journal of Money, Credit and Banking,
Blackwell Publishing, vol. 37(3), pages 539-60, June.
- Francisco Marcos Rodrigues Figueiredo, 2001. "Evaluating Core Inflation Measures for Brazil," Working Papers Series 14, Central Bank of Brazil, Research Department.
- Morana, Claudio, 2000. "Measuring core inflation in the euro area," Working Paper Series 0036, European Central Bank.
- Michael F. Bryan & Stephen G. Cecchetti & Rodney L. Wiggins II, 1997.
"Efficient inflation estimation,"
9707, Federal Reserve Bank of Cleveland.
- Alexandra Heath & Ivan Roberts & Tim Bulman, 2004. "Inflation in Australia: Measurement and Modelling," RBA Annual Conference Volume, in: Christopher Kent & Simon Guttmann (ed.), The Future of Inflation Targeting Reserve Bank of Australia.
- Jim Dolmas, 2005. "Trimmed mean PCE inflation," Working Papers 0506, Federal Reserve Bank of Dallas.
- Vega, Juan Luis & Wynne, Mark A., 2001. "An evaluation of some measures of core inflation for the euro area," Working Paper Series 0053, European Central Bank.
- Robert Rich & Charles Steindel, 2005. "A review of core inflation and an evaluation of its measures," Staff Reports 236, Federal Reserve Bank of New York.
- Pietro Catte & Torsten Sløk, 2005. "Assessing the value of indicators of underlying inflation for monetary policy," OECD Economics Department Working Papers 461, OECD Publishing.
- Joanne Cutler, 2001. "Core Inflation in the UK," Discussion Papers 03, Monetary Policy Committee Unit, Bank of England.
- Pelin Berkmen, 2002. "Measuring Core Inflation for Turkey - Trimmed Means Approach," Central Bank Review, Research and Monetary Policy Department, Central Bank of the Republic of Turkey, vol. 2(2), pages 1-18.
- Smith, Julie K, 2004. "Weighted Median Inflation: Is This Core Inflation?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 36(2), pages 253-63, April.
- 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.
- Scott Roger, 2000. "Relative Prices, Inflation and Core Inflation," IMF Working Papers 00/58, International Monetary Fund.
- Orhun Sevinc, 2012. "Enflasyon Ana Egiliminin Temel Bilesenler Analiziyle Incelenmesi," CBT Research Notes in Economics 1208, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
- M. Utku Ozmen & Orhun Sevinc, 2011. "Price Rigidity In Turkey : Evidence From Micro Data," Working Papers 1125, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
- Oguz Atuk & M. Utku Ozmen & Necati Tekatli, 2011. "Cekirdek Enflasyon Gostergelerinin Kullanimi Uzerine Bir Degerlendirme," CBT Research Notes in Economics 1101, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Gulhanim Kayatas).
If references are entirely missing, you can add them using this form.