Has core inflation been doing a good job in Brazil?
This paper assesses the performance of the core inflation measures calculated by the Brazilian Central Bank (BCB). The evidence shows that they do not meet some key statistical criteria that a good core inflation should have: unbiasedness and the ability to forecast inflation. That performance stems, to a large extent, from the lack of a well-grounded statistical and economical basis behind them. Three new measures are built and assessed using the same criteria. The evidence shows that their behaviour is more in accordance to what the theory claims. However, they still lack the ability to help forecasting inflation. Hence both the BCB and the market should use core inflation cautiously.
|Date of creation:||Dec 2009|
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