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A New Core Inflation Indicator for Turkey (Turkiye Ekonomisi Icin Yeni Bir Cekirdek Enflasyon Gostergesi)

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  • Necati Tekatli

Abstract

This paper has two main objectives. The first objective is to propose a new indicator of core inflation, which is obtained by cleaning month on month relative price fluctuations from overall price changes and idiosyncratic dynamics. We use a factor model with the subcomponents of CPI inflation to extract this new core indicator. The second objective is to evaluate the performance of this new indicator and two widely used core indicators for Turkey, H and I, by the help of four criteria designed to assess the informativeness and the predictive power of these series for the analysis of overall inflation. The results suggest that the new indicator, Fcore, is a good measure of core inflation and a useful tool for policy analysis. Moreover, the core indicator H is a more informative measure of core inflation compared to core indicator I.

Suggested Citation

  • Necati Tekatli, 2010. "A New Core Inflation Indicator for Turkey (Turkiye Ekonomisi Icin Yeni Bir Cekirdek Enflasyon Gostergesi)," Working Papers 1019, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
    • Handle: RePEc:tcb:wpaper:1019
    as

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    References listed on IDEAS

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    Keywords

    Inflation; Core inflation; Factor model; Bayesian time series;
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