IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this article

Underlying Inflation and the Distribution of Price Change: Evidence from the Japanese Trimmed-Mean CPI

Listed author(s):
  • Mio, Hitoshi

    (Bank of Japan)

  • Higo, Masahiro

    (Bank of Japan)

Registered author(s):

    In this paper, we analyze the use of the trimmed-mean Consumer Price Index (trimmed CPI) as a measure of underlying inflation. We focus on empirical evidence that the cross-sectional price change distribution often but temporarily skews extremely to each side and that large but temporary variations in inflation correspond to the occurrence of the skewness. We find that the skewness of the distribution is mainly caused by idiosyncratic, temporary relative price shocks and that the components which contribute to the skewness of the distribution shift from time to time. Trimming 15 percent from each tail of the cross-sectional price change distribution systematically mitigates the fluctuation of the price index related to broad-based temporary relative price shocks. Thus, the trimmed CPI can be regarded as more appropriate for identifying underlying inflation compared with the CPI excluding fresh foods (CPI ex. fresh foods), which is generally regarded as the "core inflation index" in Japan. Distinguishing temporary price variations and underlying inflation using a measure of the skewness of the price change distribution provides central banks with increased information for evaluations of prior policies and present price developments, and for predictions of future inflation.

    If 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.

    File URL:
    Download Restriction: no

    Article provided by Institute for Monetary and Economic Studies, Bank of Japan in its journal Monetary and Economic Studies.

    Volume (Year): 17 (1999)
    Issue (Month): 1 (May)
    Pages: 103-132

    in new window

    Handle: RePEc:ime:imemes:v:17:y:1999:i:1:p:103-132
    Contact details of provider: Postal:
    2-1-1 Nihonbashi, Hongoku-cho, Chuo-ku, Tokyo 103

    Phone: +81-3-3279-111
    Fax: +81-3-3510-1265
    Web page:

    More information through EDIRC

    No references listed on IDEAS
    You can help add them by filling out this form.

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:ime:imemes:v:17:y:1999:i:1:p:103-132. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Kinken)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.