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An Alternative Measure of Core Inflation

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  • Michael Pedersen

Abstract

We combine the ideas of the trimmed mean and the Edgeworth index to construct an alternative measure of core inflation named “Trim of most volatile components (TMVC)”. At each point of time this measure trims away the components of the price index, which have been most volatile in the past. TMVC tracks trend inflation better than other core inflation measures in the euro zone, but in the US the evidence is weaker.

Suggested Citation

  • Michael Pedersen, 2006. "An Alternative Measure of Core Inflation," Working Papers Central Bank of Chile 366, Central Bank of Chile.
    • Handle: RePEc:chb:bcchwp:366
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    File URL: https://www.bcentral.cl/documents/33528/133326/DTBC_366.pdf
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    References listed on IDEAS

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    1. Seamus Hogan & Marianne Johnson & Thérèse Laflèche, 2001. "Core Inflation," Technical Reports 89, Bank of Canada.
    2. Michael F. Bryan & Stephen G. Cecchetti, 1994. "Measuring Core Inflation," NBER Chapters, in: Monetary Policy, pages 195-219, National Bureau of Economic Research, Inc.
    3. Juan-Luis Vega & Mark A. Wynne, 2003. "A First Assessment of Some Measures of Core Inflation for the Euro Area," German Economic Review, Verein für Socialpolitik, vol. 4, pages 269-306, August.
    4. Juan‐Luis Vega & Mark A. Wynne, 2003. "A First Assessment of Some Measures of Core Inflation for the Euro Area," German Economic Review, Verein für Socialpolitik, vol. 4(3), pages 269-306, August.
    5. Smith, Julie K, 2004. "Weighted Median Inflation: Is This Core Inflation?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 36(2), pages 253-263, April.
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    Cited by:

    1. Riaz Riazuddin & Muhammad Amin Khan Lodhi & Muhammad Ashfaq & Behzad Ali Ahmad, 2013. "A New Measure of Core Inflation in Pakistan," SBP Working Paper Series 66, State Bank of Pakistan, Research Department.
    2. Carlomagno, Guillermo & Fornero, Jorge & Sansone, Andrés, 2023. "A proposal for constructing and evaluating core inflation measures," Latin American Journal of Central Banking (previously Monetaria), Elsevier, vol. 4(3).
    3. Guillermo Carlomagno & Jorge Fornero & Andrés Sansone, 2021. "Toward a general framework for constructing and evaluating core inflation measures," Working Papers Central Bank of Chile 913, Central Bank of Chile.
    4. Michael Pedersen, 2009. "An Alternative Core Inflation Measure," German Economic Review, Verein für Socialpolitik, vol. 10(2), pages 139-164, May.
    5. Shahiduzzaman, Md, 2009. "Measuring Core Inflation in Bangladesh: The Choice of Alternative Methods," Bangladesh Development Studies, Bangladesh Institute of Development Studies (BIDS), vol. 32(1), pages 23-44, March.
    6. Michael Pedersen, 2009. "An Alternative Core Inflation Measure," German Economic Review, Verein für Socialpolitik, vol. 10(2), pages 139-164, May.
    7. Felipe Córdova & María Carolina Grünwald & Michael Pedersen, 2008. "Alternative Measures of Core Inflation in Chile," Working Papers Central Bank of Chile 471, Central Bank of Chile.

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