Why should Central Banks avoid the use of the underlying inflation indicator?
This paper assesses the usefulness of the commonly used underlying inflation indicator, in light of the criteria proposed in Marques et al. (2000). Empirical evidence for a group of six countries strongly suggets that the use of underlying inflation as an indicator of trend inflation should be avoided.
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References listed on IDEAS
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- Freeman, Donald G., 1998. "Do core inflation measures help forecast inflation?," Economics Letters, Elsevier, vol. 58(2), pages 143-147, February.
- Alan S. Blinder, 1982. "The Anatomy of Double-Digit Inflation in the 1970s," NBER Chapters, in: Inflation: Causes and Effects, pages 261-282 National Bureau of Economic Research, Inc.
- 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.
- Michael F. Bryan & Stephen G. Cecchetti & Rodney L. Wiggins, 1997.
"Efficient inflation estimation,"
9707, Federal Reserve Bank of Cleveland.
- L.J. Álvarez & M de los Llanos Matea, 2001.
"Underlying Inflation Measures in Spain,"
DNB Staff Reports (discontinued)
60, Netherlands Central Bank.
- Michael F. Bryan & Stephen G. Cecchetti, 1994.
"Measuring Core Inflation,"
in: Monetary Policy, pages 195-219
National Bureau of Economic Research, Inc.
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