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Revisiting the information content of core inflation

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  • Michele Lenza

Abstract

Should a medium-term-oriented monetary policy completely disregard fluctuations in energy and food prices? This article shows that changes in energy and food prices in the euro area are transmitted, with a delay, to the remaining items in the consumer price basket. Hence, excluding energy and food prices from the index of consumer prices may distort the timeliness and reliability of signals of future inflationary pressures. JEL Classification: E0, E3

Suggested Citation

  • Michele Lenza, 2011. "Revisiting the information content of core inflation," Research Bulletin, European Central Bank, vol. 14, pages 11-13.
    • Handle: RePEc:ecb:ecbrbu:2011:0014:3
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    File URL: http://www.ecb.europa.eu/pub/pdf/other/researchbulletin14en.pdf
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    References listed on IDEAS

    as
    1. Angela Maddaloni & Jose-Luis Peydro, 2011. "Bank Risk-taking, Securitization, Supervision, and Low Interest Rates: Evidence from the Euro-area and the U.S. Lending Standards," The Review of Financial Studies, Society for Financial Studies, vol. 24(6), pages 2121-2165.
    2. Michael Ehrmann & Marcel Fratzscher & Refet S Güürkaynak & Eric T Swanson, 2011. "Convergence and Anchoring of Yield Curves in the Euro Area," The Review of Economics and Statistics, MIT Press, vol. 93(1), pages 350-364, February.
    3. Fratzscher, Marcel & Chudik, Alexander, 2010. "Identifying the Global Transmission of the 2007-09 Financial Crisis in a GVAR Model," CEPR Discussion Papers 8093, C.E.P.R. Discussion Papers.
    4. Helge Berger & Michael Ehrmann & Marcel Fratzscher, 2011. "Monetary Policy in the Media," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 43(4), pages 689-709, June.
    5. Giannone, Domenico & Lenza, Michele & Momferatou, Daphne & Onorante, Luca, 2014. "Short-term inflation projections: A Bayesian vector autoregressive approach," International Journal of Forecasting, Elsevier, vol. 30(3), pages 635-644.
    6. Chudik, Alexander & Fratzscher, Marcel, 2011. "Identifying the global transmission of the 2007-2009 financial crisis in a GVAR model," European Economic Review, Elsevier, vol. 55(3), pages 325-339, April.
    7. Koopman, Siem Jan & Lucas, André & Schwaab, Bernd, 2011. "Modeling frailty-correlated defaults using many macroeconomic covariates," Journal of Econometrics, Elsevier, vol. 162(2), pages 312-325, June.
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    Cited by:

    1. Giri, Federico, 2022. "The relationship between headline, core, and energy inflation: A wavelet investigation," Economics Letters, Elsevier, vol. 210(C).
    2. Lenza, Michele & Moutachaker, Inès & Paredes, Joan, 2023. "Density forecasts of inflation: a quantile regression forest approach," Working Paper Series 2830, European Central Bank.

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    More about this item

    Keywords

    core inflation;

    JEL classification:

    • E0 - Macroeconomics and Monetary Economics - - General
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles

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