Measures of Trend Inflation in Hong Kong
The concept of trend inflation is crucial for macroeconomic analysis and policy formulation by central banks. In this paper, we compare measures of trend inflation in Hong Kong estimated by the exclusion and statistical methods. Our findings suggest that the trend inflation estimated by the exclusion method (by excluding basic food, energy and other volatile items) and the principal component technique have strong predictive power on future changes in headline CPI or PCE inflation. Evaluation results based on qualitative and quantitative criteria suggest that the two estimation methods have their own strengths and weaknesses, and none of the methods has clear absolute advantage over the other for measuring trend inflation.
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Working Papers in Applied Economic Theory
98-06, Federal Reserve Bank of San Francisco.
- Pedro Duarte Neves & Carlos Robalo Marques & Afonso Gonçalves da Silva, 2001.
"Using the first principal component as a core inflation indicator,"
Economic Bulletin and Financial Stability Report Articles,
Banco de Portugal, Economics and Research Department.
- José Ferreira Machado & Carlos Robalo Marques & Pedro Duarte Neves & Afonso Gonçalves da Silva, 2001. "Using the First Principal Component as a Core Inflation Indicator," Working Papers w200109, Banco de Portugal, Economics and Research Department.
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