Author: Laurence M. Ball
Publisher: International Monetary Fund
ISBN:
Category : Business & Economics
Languages : en
Pages : 35
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Book Description
The standard measure of core or underlying inflation is the inflation rate excluding food and energy prices. This paper constructs an alternative measure, the weighted median inflation rate, for 38 advanced and emerging economies using subclass level disaggretion of the CPI over 1990-2021, and compares the properties of this measure to those of standard core. For quarterly data, we find that the weighted median is less volatile than standard core, more closely related to economic slack, and more closely related to headline inflation over the next year. The weighted median also has a drawback: in most countries, it has a lower average level than headline inflation. We therefore also consider a measure of core inflation that eliminates this bias, which is based on the percentile of sectoral inflation rates that matches the sample average of headline CPI inflation.
Author: Julie K. Smith
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
This paper investigates core inflation defined as the best predictor of US inflation. I compare forecasts obtained using the weighted median consumer price index inflation rate, a trimmed mean consumer price index inflation rate, the consumer price index inflation rate and the consumer price index less food and energy inflation rate. The latter two often have been considered informative about future inflation movements. The unconditional predictions using the weighted median are more accurate than those made with the other measures. Moreover, the weighted median is a better predictor even when conditioning on real variables. These results support that the weighted median is a good measure of core inflation.
Author: Statistics Canada. Prices Division
Publisher:
ISBN:
Category :
Languages : en
Pages : 43
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Book Description
Author: Laurence M. Ball
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
Economists are puzzled by the behavior of U.S. inflation since the Great Recession of 2008-2009, and many suggest that the Phillips curve relating inflation to unemployment has broken down. This paper argues that inflation behavior is easier to understand if we divide headline inflation into core and transitory components, and if core inflation is measured by the weighted median of industry inflation rates. This weighted median is less volatile than the traditional measure of core inflation, the inflation rate excluding food and energy prices, because it filters out large price changes in all industries. We illustrate the usefulness of the weighted median with a case study of inflation in 2017 and early 2018. We also show that a Phillips curve relating the weighted median to unemployment appears clearly in the data for 1985-2017, with no sign of a breakdown in 2008.
Author: Jacques Taillon
Publisher:
ISBN:
Category : Inflation (Finance)
Languages : en
Pages :
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Book Description
Author: Robert Rich
Publisher: DIANE Publishing
ISBN: 1428988777
Category : Business & Economics
Languages : en
Pages : 520
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Book Description
The ability of central banks to differentiate between permanent & transitory price movements is critical for the conduct of monetary policy. The importance of gauging the persistence of price changes has led to the development of measures of underlying, or ¿core,¿ inflation that are designed to remove transitory price changes from aggregate inflation data. This article examines several proposed measures of core inflation -- the ex food & energy series, an ex energy series, a weighted median series, & an exponentially smoothed series -- to identify a ¿best¿ measure. Evaluates the measures¿ performance according to criteria such as ease of design, & accuracy in tracking trend inflation. Charts & tables.
Author: Mick Silver
Publisher: International Monetary Fund
ISBN:
Category : Business & Economics
Languages : en
Pages : 60
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Book Description
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, imputation 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. Country practice can differ in how the approaches are implemented and how their appropriateness is assessed. There is little consistency in the results of country studies to readily suggest guidelines on accepted methods.
Author: Tito Nícias Teixeira da Silva Filho
Publisher: International Monetary Fund
ISBN: 1498374743
Category : Business & Economics
Languages : en
Pages : 19
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Book Description
Intuitively core inflation is understood as a measure of inflation where noisy price movements are avoided. This is typically achieved by either excluding or downplaying the importance of the most volatile items. However, some of those items show high persistence, and one certainly does not want to disregard persistent price changes. The non-equivalence between volatility and (the lack of) persistence implies that when one excludes volatile items relevant information is likely to be discarded. Therefore, we propose a new type of core inflation measure, one that takes simultaneously into account both volatility and persistence. The evidence shows that such measures far outperform those based on either volatility or persistence. The latter have been advocated in the literature in recent years.
Author: Taillon, Jacques
Publisher:
ISBN: 9780660605630
Category : Inflation (Finance) Canada Statistical methods
Languages : en
Pages : 86
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Book Description
Author: Robert W. Rich
Publisher:
ISBN:
Category :
Languages : en
Pages : 20
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Book Description
The ability of central banks to differentiate between permanent and transitory price movements is critical for the conduct of monetary policy. The importance of gauging the persistence of price changes in a timely manner has led to the development of measures of underlying, or core, inflation that are designed to remove transitory price changes from aggregate inflation data. Given the usefulness of this information to policymakers, there is a surprising lack of consensus on a preferred measure of U.S. core inflation. This article examines several proposed measures of core inflation - the popular ex food and energy series, an ex energy series, a weighted median series, and an exponentially smoothed series - to identify a best measure. The authors evaluate the measures' performance according to criteria such as ease of design and accuracy in tracking trend inflation, as well as explanatory content for within-sample and out-of-sample movements in aggregate CPI and PCE inflation. The study reveals that the candidate series perform very differently across aggregate inflation measures, criteria, and sample periods. The authors therefore find no compelling evidence to focus on one particular measure of core inflation, including the series that excludes food and energy prices. They attribute their results to the design of the individual measures and the measures' inability to account for variability in the nature and sources of transitory price movements.
