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Measuring Core Inflation (Now published in Economic Journal, vol. 105, No. 432 (September 1995), pp.1130-1144.)

Author

Listed:
  • Danny Quah
  • Shaun P. Vahey

Abstract

In this paper, we argue that measured (RPI) inflation is conceptually mismatched with core inflation: the difference is more than just "measurement error". We propose a technique for measuring core inflation, based on an explicit long-run economic hypothesis. Core inflation is defined as that component of measured inflation that has no (medium-to) long-run impact on real output - a notion that is consistent with the vertical long-run Phillips curve interpretation of the comovements in inflation and output. We construct a measure of core inflation by placing dynamic restrictions on a vector autoregression (VAR) system.

Suggested Citation

  • Danny Quah & Shaun P. Vahey, 1995. "Measuring Core Inflation (Now published in Economic Journal, vol. 105, No. 432 (September 1995), pp.1130-1144.)," STICERD - Econometrics Paper Series 282, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
    • Handle: RePEc:cep:stiecm:282
    as

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