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Core Inflation in Selected European Union Countries



We calculate core inflation indicators for Austria, Belgium, Finland, France, Germany, Italy, the Netherlands, Sweden and the United Kingdom using two structural vector-autoregression (SVAR) models. In the first one we use out-put and prices to identify supply and demand shocks by long-run identifying restrictions, for the second one we add short-term nominal interest rates to capture effects of monetary disturbances. Core inflation is then defined as driven by demand and, respectively, monetary shocks. Comparing our results to other studies we conclude that the resulting core inflation indicator can be regarded as helpful for monetary policy.

Suggested Citation

  • Christine Gartner & Gert Wehinger, 1998. "Core Inflation in Selected European Union Countries," Working Papers 33, Oesterreichische Nationalbank (Austrian Central Bank).
  • Handle: RePEc:onb:oenbwp:33

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    Cited by:

    1. Scott Roger, 1998. "Core inflation: concepts, uses and measurement," Reserve Bank of New Zealand Discussion Paper Series G98/9, Reserve Bank of New Zealand.
    2. Mio, Hitoshi, 2002. "Identifying Aggregate Demand and Aggregate Supply Components of Inflation Rate: A Structural Vector Autoregression Analysis for Japan," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 20(1), pages 33-56, January.
    3. Martha Misas Arango & Enrique López Enciso & Juana Téllez Corredor & José Fernando Escobar, 2005. "La Inflación Subyacente en Colombia: Un Enfoque de Tendencias Estocásticas Comunes Asociadas a un VEC Estructural," Borradores de Economia 324, Banco de la Republica de Colombia.
    4. 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.
    5. Meyler, Aidan, 1999. "A Statistical Measure Of Core Inflation," Research Technical Papers 2/RT/99, Central Bank of Ireland.
    6. 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.
    7. Wojciech W Charemza & Svetlana Makarova, 2006. "Ex ante Dynamics of Real Effects of Monetary Policy: Theory and Evidence for Poland and Russia, 2001–2003," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 48(3), pages 458-479, September.
    8. Wojciech Charemza & Svetlana Makarova & Imran Shah, 2015. "Making the most of high inflation," Applied Economics, Taylor & Francis Journals, vol. 47(34-35), pages 3723-3739, July.
    9. Wojciech Charemza & Svetlana Makarova & Imran Shah, 2013. "Frequent episoded of high inflation and real effects," EcoMod2013 5478, EcoMod.
    10. Jamie Armour, 2006. "An Evaluation of Core Inflation Measures," Staff Working Papers 06-10, Bank of Canada.
    11. Robalo Marques, Carlos & Duarte Neves, Pedro & Morais Sarmento, Luis, 2003. "Evaluating core inflation indicators," Economic Modelling, Elsevier, vol. 20(4), pages 765-775, July.
    12. Abdul Aleem & Amine Lahiani, 2011. "Estimation and evaluation of core inflation measures," Applied Economics, Taylor & Francis Journals, vol. 43(25), pages 3619-3629.
    13. Charemza, Wojciech W. & Makarova, Svetlana, 2005. "Ex-ante dynamics of real effects of monetary policy : theory and evidence for Poland and Russia," BOFIT Discussion Papers 20/2005, Bank of Finland, Institute for Economies in Transition.
    14. Pelinescu, Elena & Dospinescu, Andrei Silviu, 2008. "Alternative Measures of Core Inflation in Romania," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 5(1), pages 134-148, March.
    15. Hahn, Elke, 2002. "Core inflation in the Euro area: Evidence from the structural VAR approach," CFS Working Paper Series 2001/09, Center for Financial Studies (CFS).
    16. Renato Filosa, 2001. "Monetary policy rules in some emerging economies," BIS Papers chapters,in: Bank for International Settlements (ed.), Modelling aspects of the inflation process and the monetary transmission mechanism in emerging market countries, volume 8, pages 39-68 Bank for International Settlements.
    17. Koichiro Kamada & Naohisa Hirakata, 2002. "Import Penetration and Consumer Prices," Bank of Japan Working Paper Series Research and Statistics D, Bank of Japan.
    18. Mark A. Wynne, 2008. "Core inflation: a review of some conceptual issues," Review, Federal Reserve Bank of St. Louis, issue May, pages 205-228.
    19. C.K. Folkertsma & K. Hubrich, 2000. "Performance of core inflation measures," WO Research Memoranda (discontinued) 639, Netherlands Central Bank, Research Department.
    20. Gert Wehinger, 2000. "Causes of Inflation in Europe, the United States and Japan: Some Lessons for Maintaining Price Stability in the EMU from a Structural VAR Approach," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 27(1), pages 83-107, March.
    21. Hondroyiannis, George & Papapetrou, Evangelia, 2006. "Stock returns and inflation in Greece: A Markov switching approach," Review of Financial Economics, Elsevier, vol. 15(1), pages 76-94.
    22. Hogan, Seamus & Marianne Johnson & Thérèse Laflèche, 2001. "Core Inflation," Technical Reports 89, Bank of Canada.
    23. Luis J. Álvarez & María de los Llanos Matea, 1999. "Underlying Inflation Measures in Spain," Working Papers 9911, Banco de España;Working Papers Homepage.

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