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Constructing Core Inflation Index for Russia

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  • Tsyplakov Alexander

Abstract

The paper studies a possibility to construct a price index (“core inflation” index) for Russia, which is more appropriate for assessing monetary policy than consumer price index. The index is derived by applying to Russian data trimmed mean method, which explores cross-sectional dimension of the data. We find that cross-sectional distributions of individual price changes are significantly long-tailed. In this situation ordinary sample mean is not very efficient and robust estimator of the central tendency. Trimming 50-100% of observations leads to a large gain in efficiency. Moreover, trimmed mean series is shown to be less volatile than official consumer price index.

Suggested Citation

  • Tsyplakov Alexander, 2004. "Constructing Core Inflation Index for Russia," EERC Working Paper Series 04-04e, EERC Research Network, Russia and CIS.
    • Handle: RePEc:eer:wpalle:04-04e
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    References listed on IDEAS

    as
    1. Diewert, Erwin, 2007. "Index Numbers," Economics working papers diewert-07-01-03-08-17-23, Vancouver School of Economics, revised 31 Jan 2007.
    2. Mark A. Wynne, 2008. "Core inflation: a review of some conceptual issues," Review, Federal Reserve Bank of St. Louis, vol. 90(May), pages 205-228.
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    More about this item

    Keywords

    Russia; core inflation; inflation measurement; trimmed mean; Russian inflation;
    All these keywords.

    JEL classification:

    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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