Evaluating Core Inflation
This paper proposes testable conditions that core inflation measures should satisfy. Trend inflation indicators calculated by Banco de Portugal are tested against this background. The major conclusion is that the so-called "underlying inflation", the "10% trimmed mean", and the "25% trimmed mean" do not meet the proposed conditions. However, they are satisfied by the "37-month centred moving average", the "first principal component" and the "standard deviation weighted CPI" indicators. Yet, only the last two indicators can be used as useful core inflation measures, as the first one is not computable in real time.
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in: Monetary Policy, pages 195-219
National Bureau of Economic Research, Inc.
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- Mark A. Wynne, 1999.
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9903, Federal Reserve Bank of Dallas.
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- Wynne, Mark A., 1999. "Core inflation: a review of some conceptual issues," Working Paper Series 0005, European Central Bank.
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Federal Reserve Bank of St. Louis, issue May, pages 143-155.
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