Core Inflation: A Critical Guide

Mankikar, Alan; Paisley, Jo

doi:10.2139/ssrn.670222

Cited by 16 publications

(38 citation statements)

References 13 publications

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“…Also, unlike limited influence estimators considered below, the components of core inflation are unchanged every period, so one is considering like for like over time. However, as Mankikar and Paisley (2004) point out, this comes at the cost of assuming that some components' price changes contain no information at all about underlying inflation and do not add to the information set of policy makers.…”

Section: A Exclusion-based Methodsmentioning

confidence: 99%

“…However, as Mankikar and Paisley (2004) point, they are not without problems. For example, assume that in response to an increase in aggregate demand, only a portion of firms raise prices while the remainder leave their prices unchanged.…”

Section: B Limited Influence Estimatorsmentioning

confidence: 98%

“…Added to this, Mankikar and Paisley (2004) and Silver (2007) identify two different uses for core inflation. The first is to provide a measure of inflation stripped of noise to provide a measure of actual inflation for policy assessment.…”

Section: Alternative Measures Of Core Inflationmentioning

confidence: 99%

“…Following Cecchetti (1997), it has become popular in the literature to choose a trim which minimizes the root mean square error (RMSE) with respect to the 37-month centered moving average of headline inflation. However, as Mankikar and Paisley (2004) point out, there is no a priori reason to assume that this is a sensible benchmark for any given country. It has been argued that it possesses the benefit of being smooth, but if the underlying aggregate demand shocks hitting the economy are not smooth or if the transmission of these shocks is changing, then underlying inflation would not be expected to be smooth either.…”

Section: B Limited Influence Estimatorsmentioning

confidence: 99%

“…A practical problem with these tests is that there is no consensus on the properties of core inflation. Some authors (inter alia Roger, 1998;and Wynne, 2008) emphasize the importance of the credibility of a core inflation measure, in particular when used as an inflation target, while others emphasize the importance of unbiasedness and predictive ability (see for example, Marques et al, 2000 and2003;Bryan and Cecchetti, 1993;and Mankikar and Paisley, 2004). In addition, Silver (2007) argues that different methods for estimating core inflation are designed for different purposes and thus that no single measure should be expected to meet every criteria.…”

Section: Introductionmentioning

confidence: 99%

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Measures of Underlying Inflation in Sri Lanka

Gupta

2009

IMF Working Papers

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This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.During the first half of 2008, Sri Lanka witnessed significantly higher inflation than most other emerging Asian countries. Inflation has since declined amid declining world commodity prices and tight monetary policy. Given the sensitivity to global commodity prices, a core inflation measure could be useful for monetary policy. The purpose of this paper is to compare the performance of Sri Lanka's existing official measure of core inflation against alternative measures. Our findings suggest that the existing measure does contain information about the future path of headline information, but may be inadequate as a communication tool for the Central Bank. JEL Classification Numbers: C50, E31, E52

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Section: A Exclusion-based Methodsmentioning

confidence: 99%

Section: B Limited Influence Estimatorsmentioning

confidence: 98%

Section: Alternative Measures Of Core Inflationmentioning

confidence: 99%

Section: B Limited Influence Estimatorsmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Measures of Underlying Inflation in Sri Lanka

Gupta

2009

IMF Working Papers

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Core Inflation: Measurement and Statistical Issues in Choosing Among Alternative Measures

Silver¹

2007

IMF Staff Pap

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This paper provides an overview of statistical measurement issues relating to alternative measures of core inflation and the criteria for choosing among them. The approaches to measurement considered include exclusion-based methods, limited influence estimators, reweighting, and economic modeling. Criteria for judging which approach to use include credibility, control, deviations from a smoothed reference series, volatility, predictive ability, causality and cointegration tests, and correlation with money supply. The extensive number of measures, criteria by which their appropriateness is assessed, and lack of consistency in the results of country studies argue for a data-driven approach.

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Micro‐based Estimates of Heterogeneous Pricing Rules: The United States vs. the Euro Area*

Álvarez

Burriel

2010

Scandinavian J Economics

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This paper presents US and euro area estimates for a fully heterogeneous model, in which there is a continuum of firms setting prices with a constant probability of adjustment, which may differ from firm to firm. The estimated model accurately matches the empirical distribution function of individual price durations for the US and the euro area. Incorporating these micro-based pricing rules into a DSGE model, we find that nominal shocks have a greater real impact in the fully heterogeneous economy than in the standard Calvo model. We also find that nominal and real shocks bring about a reallocation of resources among sectors. Monetary policy is found to have a greater real impact in the euro area than in the United States.

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Core Inflation: A Critical Guide

Cited by 16 publications

References 13 publications

Measures of Underlying Inflation in Sri Lanka

Measures of Underlying Inflation in Sri Lanka

Core Inflation: Measurement and Statistical Issues in Choosing Among Alternative Measures

Micro‐based Estimates of Heterogeneous Pricing Rules: The United States vs. the Euro Area*

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