A new approach to measuring core inflation for Turkey: SATRIM
Policymakers are interested in the general trend of inflation. Headline inflation is subject to different shocks and contains noise due to the heterogeneity inherit in it. Therefore, core inflation measures, which are better capable of indicating general trend, are developed. Atuk and Özmen (2009) introduced and discussed various core inflation measures for Turkey. Among various measures discussed, trimmed mean inflation –TRIM– performs relatively better. However, this measure fails to distinguish signal and noise when dealing with seasonal items. To overcome this drawback, this study introduces a new core inflation measure SATRIM–seasonally adjusted trimmed mean inflation. This methodology seasonally adjusts disaggregated price series and uses seasonally adjusted monthly figures in trimming process. Overall, SATRIM outperforms TRIM measure on the basis of trend tracking ability in different time spans. Moreover, SATRIM, which is dynamic in nature, is more careful when dealing with seasonal items, focusing on non-seasonal extreme changes.
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