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Performance of core inflation measures

  • C.K. Folkertsma
  • K. Hubrich

This paper assesses the performance of core inflation measures based on the structural VAR approach. Since core or monetary inflation is not directly observable, we develop a monetary general equilibrium model that fits real aggregated European data and use this model to generate time series for headline as well as core inflation. For five different schemes which attempt to identify core inflation within a VAR framework it is investigated whether the estimated core inflation series recover the true series sufficiently precise in order to be useful for monetary policy.

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File URL: http://www.dnb.nl/binaries/wo0639_tcm46-145945.pdf
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Paper provided by Netherlands Central Bank, Research Department in its series WO Research Memoranda (discontinued) with number 639.

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Date of creation: 2000
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Handle: RePEc:dnb:wormem:639
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Web page: http://www.dnb.nl/en/
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  13. Toda, Hiro Y, 1994. "Finite Sample Properties of Likelihood Ratio Tests for Cointegrating Ranks when Linear Trends are Present," The Review of Economics and Statistics, MIT Press, vol. 76(1), pages 66-79, February.
  14. C.K. Folkertsma, 2000. "Liquidity Effects and Welfare Costs of Inflation in an EndogenousGrowth Model," DNB Staff Reports (discontinued) 54, Netherlands Central Bank.
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  17. 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.
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  19. Quah, Danny & Vahey, Shaun P, 1995. "Measuring Core Inflation?," Economic Journal, Royal Economic Society, vol. 105(432), pages 1130-44, September.
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  27. G. William Schwert, 1988. "Tests For Unit Roots: A Monte Carlo Investigation," NBER Technical Working Papers 0073, National Bureau of Economic Research, Inc.
  28. Fuerst, Timothy S., 1992. "Liquidity, loanable funds, and real activity," Journal of Monetary Economics, Elsevier, vol. 29(1), pages 3-24, February.
  29. Christiano, Lawrence J & Eichenbaum, Martin, 1992. "Liquidity Effects and the Monetary Transmission Mechanism," American Economic Review, American Economic Association, vol. 82(2), pages 346-53, May.
  30. Toda, Hiro Y., 1995. "Finite Sample Performance of Likelihood Ratio Tests for Cointegrating Ranks in Vector Autoregressions," Econometric Theory, Cambridge University Press, vol. 11(05), pages 1015-1032, October.
  31. Christine Gartner & Gert Wehinger, 1998. "Core Inflation in Selected European Union Countries," Working Papers 33, Oesterreichische Nationalbank (Austrian Central Bank).
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  41. repec:cup:etheor:v:11:y:1995:i:5:p:1015-32 is not listed on IDEAS
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  43. Warne, A., 1993. "A Common Trends Model: Identification, Estimation and Inference," Papers 555, Stockholm - International Economic Studies.
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