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Measuring core inflation in India: An asymmetric trimmed mean approach

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  • Naresh Kumar Sharma
  • Motilal Bicchal
  • Caroline Elliott

Abstract

The paper seeks to obtain an optimal asymmetric trimmed mean-based core inflation measure in the class of trimmed mean measures when the distribution of price changes is leptokurtic and skewed to the right for any given period. Several estimators based on asymmetric trimmed mean approach are constructed and estimates generated by use of these estimators are evaluated on the basis of certain established empirical criteria. The paper also provides the method of trimmed mean expression “in terms of percentile score.” This study uses 69 monthly price indices which are constituent components of Wholesale Price Index for the period, April 1994 to April 2009, with 1993–1994 as the base year. Results of the study indicate that an optimally trimmed estimator is found when we trim 29.5% from the left-hand tail and 20.5% from the right-hand tail of the distribution of price changes.

Suggested Citation

  • Naresh Kumar Sharma & Motilal Bicchal & Caroline Elliott, 2015. "Measuring core inflation in India: An asymmetric trimmed mean approach," Cogent Economics & Finance, Taylor & Francis Journals, vol. 3(1), pages 1014252-101, December.
  • Handle: RePEc:taf:oaefxx:v:3:y:2015:i:1:p:1014252
    DOI: 10.1080/23322039.2015.1014252
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    References listed on IDEAS

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    1. Carlos Robalo Marques & João Machado Mota, 2000. "Using the asymmetric trimmed mean as a core inflation indicator," Economic Bulletin and Financial Stability Report Articles and Banco de Portugal Economic Studies, Banco de Portugal, Economics and Research Department.
    2. Newey, Whitney & West, Kenneth, 2014. "A simple, positive semi-definite, heteroscedasticity and autocorrelation consistent covariance matrix," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 33(1), pages 125-132.
    3. Kar, Sujata, 2009. "Statistical Tools as Measures of Core Inflation for India," Indian Economic Review, Department of Economics, Delhi School of Economics, vol. 44(2), pages 225-245.
    4. Das, Abhiman & John, Joice & Singh, Sanjay, 2009. "Measuring Core Inflation in India," Indian Economic Review, Department of Economics, Delhi School of Economics, vol. 44(2), pages 247-273.
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