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Underlying Inflation Measures in Spain

  • Luis J. Álvarez
  • María de los Llanos Matea

Applying the concept of underlying inflation can be thought of as an attempt to capture the general trend in inflation more accurately than with readily available data on headline inflation. In this paper a number of approaches to the analysis of underlying inflation are examined from a unifying standpoint, stressing their complementary nature, and empirical results are presented for the Spanish economy. Different measures differ from each other in the information set which is considered to be relevant for estimating the underlying rate of inflation. We first examine the simplest of the procedures that amounts to ignoring price developments in the most volatile sub-components of the CPI and then consider limited-influence estimators that take advantage of the information contained in the cross-sectional distribution of individual prices. Statistical methods of extracting the trend component of inflation are also discussed. Finally, measures that allow for the interplay of are other economic variables considered.

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File URL: http://www.bde.es/f/webbde/SES/Secciones/Publicaciones/PublicacionesSeriadas/DocumentosTrabajo/99/Fic/dt9911e.pdf
File Function: First version, 1999
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Paper provided by Banco de Espa�a in its series Banco de Espa�a Working Papers with number 9911.

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Length: 46 pages
Date of creation: 1999
Date of revision:
Handle: RePEc:bde:wpaper:9911
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  1. Stephen G. Cecchetti, 1997. "Measuring short-run inflation for central bankers," Review, Federal Reserve Bank of St. Louis, issue May, pages 143-155.
  2. Luis J. Álvarez & Miguel Sebastian, 1995. "La inflación latente en España: una perspectiva macroeconómica," Banco de Espa�a Working Papers 9521, Banco de Espa�a.
  3. Danny Quah & Danny Quah & Shaun P. Vahey, 1995. "Measuring Core Inflation," CEP Discussion Papers dp0254, Centre for Economic Performance, LSE.
  4. Quah, Danny, 1995. "Measuring Core Inflation," CEPR Discussion Papers 1153, C.E.P.R. Discussion Papers.
  5. Michael F. Bryan & Stephen G. Cecchetti, 1993. "Measuring Core Inflation," NBER Working Papers 4303, National Bureau of Economic Research, Inc.
  6. Claus, I., 1997. "A Measure of Underlying Inflation in the United States," Working Papers 97-20, Bank of Canada.
  7. Christine Gartner & Gert Wehinger, 1998. "Core Inflation in Selected European Union Countries," Working Papers 33, Oesterreichische Nationalbank (Austrian Central Bank).
  8. Olivier Jean Blanchard & Danny Quah, 1988. "The Dynamic Effects of Aggregate Demand and Supply Disturbances," NBER Working Papers 2737, National Bureau of Economic Research, Inc.
  9. Ball, Laurence & Mankiw, N Gregory, 1995. "Relative-Price Changes as Aggregate Supply Shocks," The Quarterly Journal of Economics, MIT Press, vol. 110(1), pages 161-93, February.
  10. Víctor Gómez & Agustín Maravall, 1998. "Seasonal Adjustment and Signal Extraction in Economic Time Series," Banco de Espa�a Working Papers 9809, Banco de Espa�a.
  11. Fisher, Lance A. & Fackler, Paul L. & Orden, David, 1995. "Long-run identifying restrictions for an error-correction model of New Zealand money, prices and output," Journal of International Money and Finance, Elsevier, vol. 14(1), pages 127-147, February.
  12. María de los Llanos Matea, 1992. "Contrastes de raíces unitarias, para series mensuales. Una aplicación al IPC," Banco de Espa�a Working Papers 9214, Banco de Espa�a.
  13. Shiratsuka, Shigenori, 1997. "Inflation Measures for Monetary Policy: Measuring the Underlying Inflation Trend and Its Implication for Monetary Policy Implementation," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 15(2), pages 1-26, December.
  14. John M. Roberts, 1990. "The sources of business cycles: a monetarist interpretation," Working Paper Series / Economic Activity Section 108, Board of Governors of the Federal Reserve System (U.S.).
  15. Oosterhoff, J., 1994. "Trimmed mean or sample median?," Statistics & Probability Letters, Elsevier, vol. 20(5), pages 401-409, August.
  16. María de los Llanos Matea & Ana Valentina Regil, 1994. "Métodos para la extracción de señales y para la trimestralización," Banco de Espa�a Working Papers 9415, Banco de Espa�a.
  17. Jacquinot, P., 1998. "L'inflation sous-jacente à partir d'une approche structurelle des VAR : Une application à la France, l'Allemagne et au Royaume-Uni," Working papers 51, Banque de France.
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