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An Alternative Core Inflation Measure

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  • Michael Pedersen

Abstract

We combine the ideas of the trimmed mean and the Edgeworth index to construct an alternative measure of core inflation named 'Trim of Most Volatile Components (TMVC)'. At each point of time, this measure trims away the components of the price index that have been most volatile in the recent past. Statistical tests indicate that neither the trimmed mean nor the Edgeworth index dominates the TMVC in terms of tracking trend inflation. Copyright 2009 The Author. Journal Compilation 2009 Verein für Socialpolitik and Blackwell Publishing Ltd. 2009.

Suggested Citation

  • Michael Pedersen, 2009. "An Alternative Core Inflation Measure," German Economic Review, Verein für Socialpolitik, vol. 10, pages 139-164, May.
  • Handle: RePEc:bla:germec:v:10:y:2009:i::p:139-164
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    References listed on IDEAS

    as
    1. Mark A. Wynne, 2008. "Core inflation: a review of some conceptual issues," Review, Federal Reserve Bank of St. Louis, issue May, pages 205-228.
    2. Michael F. Bryan & Stephen G. Cecchetti & Rodney L. Wiggins, 1997. "Efficient inflation estimation," Working Paper 9707, Federal Reserve Bank of Cleveland.
    3. Juan-Luis Vega & Mark A. Wynne, 2003. "A First Assessment of Some Measures of Core Inflation for the Euro Area," German Economic Review, Verein für Socialpolitik, vol. 4, pages 269-306, August.
    4. Hogan, Seamus & Marianne Johnson & Thérèse Laflèche, 2001. "Core Inflation," Technical Reports 89, Bank of Canada.
    5. Michael Pedersen, 2009. "An Alternative Core Inflation Measure," German Economic Review, Verein für Socialpolitik, vol. 10, pages 139-164, May.
    6. Michael F. Bryan & Stephen G. Cecchetti, 1994. "Measuring Core Inflation," NBER Chapters,in: Monetary Policy, pages 195-219 National Bureau of Economic Research, Inc.
    7. Smith, Julie K, 2004. "Weighted Median Inflation: Is This Core Inflation?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 36(2), pages 253-263, April.
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    Cited by:

    1. Edward N. Gamber & Julie K. Smith, 2016. "Time-series measures of core inflation," Working Papers 2016-008, The George Washington University, Department of Economics, Research Program on Forecasting.
    2. Felipe Córdova & María Carolina Grünwald & Michael Pedersen, 2008. "Alternative Measures of Core Inflation in Chile," Working Papers Central Bank of Chile 471, Central Bank of Chile.
    3. Alan K. Detmeister, 2011. "The usefulness of core PCE inflation measures," Finance and Economics Discussion Series 2011-56, Board of Governors of the Federal Reserve System (U.S.).
    4. Riaz Riazuddin & Muhammad Amin Khan Lodhi & Muhammad Ashfaq & Behzad Ali Ahmad, 2013. "A New Measure of Core Inflation in Pakistan," SBP Working Paper Series 66, State Bank of Pakistan, Research Department.
    5. Alan K. Detmeister, 2012. "What should core inflation exclude?," Finance and Economics Discussion Series 2012-43, Board of Governors of the Federal Reserve System (U.S.).
    6. Michael Pedersen, 2009. "An Alternative Core Inflation Measure," German Economic Review, Verein für Socialpolitik, vol. 10, pages 139-164, May.
    7. Terence C. Mills, 2013. "Constructing U.K. Core Inflation," Econometrics, MDPI, Open Access Journal, vol. 1(1), pages 1-21, April.

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