IDEAS home Printed from https://ideas.repec.org/p/fip/feddwp/99-03.html
   My bibliography  Save this paper

Core inflation: a review of some conceptual issues

Author

Listed:
  • Mark A. Wynne

Abstract

This paper reviews various approaches to the measurement of core inflation that have been proposed in recent years. The objective is to determine whether the European Central Bank (ECB) should pay special attention to one or other of these measures in assessing inflation developments in the euro area. I put particular emphasis on the conceptual and practical problems that arise in the measurement of core inflation, and propose some criteria that could be used by the ECB to choose a core inflation measure.

Suggested Citation

  • Mark A. Wynne, 1999. "Core inflation: a review of some conceptual issues," Working Papers 9903, Federal Reserve Bank of Dallas.
    • Handle: RePEc:fip:feddwp:99-03
    Note: Wynne, Mark A. (2008), "Core Inflation: A Review of Some Conceptual Issues," Federal Reserve Bank of St. Louis Review 90 (3, Part 2): 205-228.
    as

    Download full text from publisher

    File URL: https://www.dallasfed.org/~/media/documents/research/papers/1999/wp9903.pdf
    File Function: Full text
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Balke, Nathan S. & Wynne, Mark A., 2000. "An equilibrium analysis of relative price changes and aggregate inflation," Journal of Monetary Economics, Elsevier, vol. 45(2), pages 269-292, April.
    2. Iris Claus, 1997. "A Measure of Underlying Inflation in the United States," Staff Working Papers 97-20, Bank of Canada.
    3. Christine Gartner & Gert Wehinger, 1998. "Core Inflation in Selected European Union Countries," Working Papers 33, Oesterreichische Nationalbank (Austrian Central Bank).
    4. Elena Angelini & Jérôme Henry & Ricardo Mestre, 2001. "A multi-country trend indicator for euro area inflation: computation and properties," BIS Papers chapters, in: Bank for International Settlements (ed.), Empirical studies of structural changes and inflation, volume 3, pages 81-108, Bank for International Settlements.
    5. Roger Beaton & Paul Fisher, 1995. "The Construction of RPIY," Bank of England working papers 28, Bank of England.
    6. Hasan Bakhshi & Tony Yates, 1999. "To trim or not to trim? An application of a trimmmed mean inflation estimator to the United Kingdom," Bank of England working papers 97, Bank of England.
    7. Todd E. Clark, 2001. "Comparing measures of core inflation," Economic Review, Federal Reserve Bank of Kansas City, vol. 86(Q II), pages 5-31.
    8. Elena Angelini & Jérôme Henry & Ricardo Mestre, 2001. "Diffusion index-based inflation forecasts for the euro area," BIS Papers chapters, in: Bank for International Settlements (ed.), Empirical studies of structural changes and inflation, volume 3, pages 109-138, Bank for International Settlements.
    9. Joanne Cutler, 2001. "Core Inflation in the UK," Discussion Papers 03, Monetary Policy Committee Unit, Bank of England.
    10. Michael F. Bryan & Stephen G. Cecchetti, 1994. "Measuring Core Inflation," NBER Chapters, in: Monetary Policy, pages 195-219, National Bureau of Economic Research, Inc.
    11. Vining, Daniel R, Jr & Elwertowski, Thomas C, 1976. "The Relationship between Relative Prices and the General Price Level," American Economic Review, American Economic Association, vol. 66(4), pages 699-708, September.
    12. Michael F. Bryan & Stephen G. Cecchetti, 1993. "The consumer price index as a measure of inflation," Economic Review, Federal Reserve Bank of Cleveland, vol. 29(Q IV), pages 15-24.
    13. Stanley Fischer & Franco Modigliani, 1978. "Towards an understanding of the real effects and costs of inflation," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 114(4), pages 810-833, December.
    14. Clements, Kenneth W & Izan, H Y, 1987. "The Measurement of Inflation: A Stochastic Approach," Journal of Business & Economic Statistics, American Statistical Association, vol. 5(3), pages 339-350, July.
    15. Marianne Baxter & Robert G. King, 1999. "Measuring Business Cycles: Approximate Band-Pass Filters For Economic Time Series," The Review of Economics and Statistics, MIT Press, vol. 81(4), pages 575-593, November.
    16. anonymous, 2000. "Monetary policy report to the Congress, February 17, 2000 (semi-annual Humphrey-Hawkins report)," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Mar, pages 161-187.
    17. Scott Roger, 1997. "A robust measure of core inflation in New Zealand, 1949-96," Reserve Bank of New Zealand Discussion Paper Series G97/7, Reserve Bank of New Zealand.
    18. Stephen G. Cecchetti, 1997. "Measuring short-run inflation for central bankers," Review, Federal Reserve Bank of St. Louis, issue May, pages 143-155.
    19. Laurence Ball & N. Gregory Mankiw, 1995. "Relative-Price Changes as Aggregate Supply Shocks," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 110(1), pages 161-193.
    20. 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.
    21. Clements, Kenneth W & Izan, H Y, 1981. "A Note on Estimating Divisia Index Numbers," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 22(3), pages 745-747, October.
    22. Alan S. Blinder, 1997. "Measuring short-run inflation for central bankers - commentary," Review, Federal Reserve Bank of St. Louis, issue May, pages 157-160.
    23. Andrea Brischetto & Anthony Richards, 2006. "The Performance of Trimmed Mean Measures of Underlying Inflation," RBA Research Discussion Papers rdp2006-10, Reserve Bank of Australia.
    24. 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.
    25. Michael F. Bryan & Stephen G. Cecchetti, 1999. "Inflation And The Distribution Of Price Changes," The Review of Economics and Statistics, MIT Press, vol. 81(2), pages 188-196, May.
    26. Cogley, Timothy, 2002. "A Simple Adaptive Measure of Core Inflation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 34(1), pages 94-113, February.
    27. Michael F. Bryan & Christopher J. Pike, 1991. "Median price changes: an alternative approach to measuring current monetary inflation," Economic Commentary, Federal Reserve Bank of Cleveland, issue Dec.
    28. Tony Richards & Tom Rosewall, 2010. "Measures of Underlying Inflation," RBA Bulletin (Print copy discontinued), Reserve Bank of Australia, pages 7-12, March.
    29. Apel, Mikael & Jansson, Per, 1999. "A Parametric Approach for Estimating Core Inflation and Interpreting the Inflation Process," Working Paper Series 80, Sveriges Riksbank (Central Bank of Sweden).
    30. Friedman, Milton, 1977. "Nobel Lecture: Inflation and Unemployment," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 451-472, June.
    31. S. Rao Aiyagari, 1990. "Deflating the case for zero inflation," Quarterly Review, Federal Reserve Bank of Minneapolis, vol. 14(Sum), pages 2-11.
    32. Faust, Jon & Leeper, Eric M, 1997. "When Do Long-Run Identifying Restrictions Give Reliable Results?," Journal of Business & Economic Statistics, American Statistical Association, vol. 15(3), pages 345-353, July.
    33. Michael F. Bryan & Stephen G. Cecchetti & Rodney L. Wiggins II, 1997. "Efficient Inflation Estimation," NBER Working Papers 6183, National Bureau of Economic Research, Inc.
    34. Cooley, Thomas F. & Dwyer, Mark, 1998. "Business cycle analysis without much theory A look at structural VARs," Journal of Econometrics, Elsevier, vol. 83(1-2), pages 57-88.
    35. Frederic S. Mishkin & Adam S. Posen, 1997. "Inflation targeting: lessons from four countries," Economic Policy Review, Federal Reserve Bank of New York, vol. 3(Aug), pages 9-110.
    36. Mark A. Wynne, 1997. "Measuring short-run inflation for central bankers - commentary," Review, Federal Reserve Bank of St. Louis, issue May, pages 161-167.
    37. Alan S. Blinder, 1980. "The Consumer Price Index and the Measurement of Recent Inflation," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 11(2), pages 539-573.
    38. E. T. McPHEE., 1928. "Notes," The Economic Record, The Economic Society of Australia, vol. 4(1), pages 92-95, May.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Mark A. Wynne, 2008. "Core inflation: a review of some conceptual issues," Review, Federal Reserve Bank of St. Louis, issue May, pages 205-228.
    2. Landau, Bettina, 2000. "Core inflation rates: a comparison of methods based on west German data," Discussion Paper Series 1: Economic Studies 2000,04, Deutsche Bundesbank.
    3. Jamie Armour, 2006. "An Evaluation of Core Inflation Measures," Staff Working Papers 06-10, Bank of Canada.
    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. Scott Roger, 1998. "Core inflation: concepts, uses and measurement," Reserve Bank of New Zealand Discussion Paper Series G98/9, Reserve Bank of New Zealand.
    6. 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.
    7. Mick Silver, 2006. "Core Inflation Measures and Statistical Issues in Choosing Among Them," IMF Working Papers 2006/097, International Monetary Fund.
    8. Todd E. Clark, 2001. "Comparing measures of core inflation," Economic Review, Federal Reserve Bank of Kansas City, vol. 86(Q II), pages 5-31.
    9. Seamus Hogan & Marianne Johnson & Thérèse Laflèche, 2001. "Core Inflation," Technical Reports 89, Bank of Canada.
    10. Vega, Juan Luis & Wynne, Mark A., 2001. "An evaluation of some measures of core inflation for the euro area," Working Paper Series 0053, European Central Bank.
    11. Vega, Juan Luis & Wynne, Mark A., 2001. "An evaluation of some measures of core inflation for the euro area," Working Paper Series 53, European Central Bank.
    12. Oguz Atuk & Mustafa Utku Ozmen, 2009. "Design and Evaluation of Core Inflation Measures for Turkey," Working Papers 0903, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
    13. 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.
    14. Alan Mankikar & Jo Paisley, 2004. "Core inflation: a critical guide," Bank of England working papers 242, Bank of England.
    15. Andrade, Isabel & O'Brien, Raymond, 2007. "A measure of core inflation in the UK," Discussion Paper Series In Economics And Econometrics 0708, Economics Division, School of Social Sciences, University of Southampton.
    16. Meyler, Aidan, 1999. "A Statistical Measure Of Core Inflation," Research Technical Papers 2/RT/99, Central Bank of Ireland.
    17. Luc Aucremanne & Guy Brys & Peter J Rousseeuw & Anja Struyf & Mia Hubert, 2003. "Inflation, relative prices and nominal rigidities," BIS Papers chapters, in: Bank for International Settlements (ed.), Monetary policy in a changing environment, volume 19, pages 81-105, Bank for International Settlements.
    18. Gagik G. Aghajanyan, 2005. "Core inflation in a small transition country: choice of optimal measures," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 2(1), pages 83-110, June.
    19. Luis J. Álvarez & María de los Llanos Matea, 1999. "Underlying Inflation Measures in Spain," Working Papers 9911, Banco de España.
    20. Luc Aucremanne, 2000. "The use of robust estimators as measures of core inflation," Working Paper Research 02, National Bank of Belgium.

    More about this item

    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

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fip:feddwp:99-03. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Amy Chapman (email available below). General contact details of provider: https://edirc.repec.org/data/frbdaus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.