What should core inflation exclude?
Consumer price inflation excluding food and energy often performs worse than other measures of underlying inflation in out-of-sample tests of predicting future inflation or tracking an ex-post measure of underlying trend inflation. Nonetheless, inflation excluding food and energy remains popular for its simplicity and transparency. Would excluding different items improve performance while maintaining the simplicity and transparency? Unfortunately, probably not. Averaging across a series of tests suggests that knowing what items to exclude before seeing the data is problematic and excluding food and energy is not a bad ex-ante guess. However, ex-post it is not difficult to construct an index which performs considerably better than excluding food and energy.
|Date of creation:||2012|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.federalreserve.gov/
More information through EDIRC
|Order Information:||Web: http://www.federalreserve.gov/pubs/feds/fedsorder.html|
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Pedro Duarte Neves & Luís Morais Sarmento & Carlos Robalo Marques, 1999.
"Evaluating core inflation indicators,"
Economic Bulletin and Financial Stability Report Articles,
Banco de Portugal, Economics and Research Department.
- Freeman, Donald G., 1998. "Do core inflation measures help forecast inflation?," Economics Letters, Elsevier, vol. 58(2), pages 143-147, February.
- Alan K. Detmeister, 2011. "The usefulness of core PCE inflation measures," Finance and Economics Discussion Series 2011-56, Board of Governors of the Federal Reserve System (U.S.).
- Michael Pedersen, 2006.
"An Alternative Measure of Core Inflation,"
Working Papers Central Bank of Chile
366, Central Bank of Chile.
- Jim Dolmas, 2009. "Excluding items from personal consumption expenditures inflation," Staff Papers, Federal Reserve Bank of Dallas, issue Jun.
- Brent Meyer & Mehmet Pasaogullari, 2010. "Simple ways to forecast inflation: what works best?," Economic Commentary, Federal Reserve Bank of Cleveland, issue Dec.
- Hogan, Seamus & Marianne Johnson & Thérèse Laflèche, 2001. "Core Inflation," Technical Reports 89, Bank of Canada.
- Smith, Julie K, 2004. "Weighted Median Inflation: Is This Core Inflation?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 36(2), pages 253-63, April.
- 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.
- Robert Rich & Charles Steindel, 2007. "A comparison of measures of core inflation," Economic Policy Review, Federal Reserve Bank of New York, issue Dec, pages 19-38.
When requesting a correction, please mention this item's handle: RePEc:fip:fedgfe:2012-43. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Kris Vajs)
If references are entirely missing, you can add them using this form.