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An Alternative Core Inflation Measure

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  • Michael Pedersen

Abstract

. We combine the ideas of the trimmed mean and the Edgeworth index to construct an alternative measure of core inflation named ‘Trim of Most Volatile Components (TMVC)’. At each point of time, this measure trims away the components of the price index that have been most volatile in the recent past. Statistical tests indicate that neither the trimmed mean nor the Edgeworth index dominates the TMVC in terms of tracking trend inflation.

Suggested Citation

  • Michael Pedersen, 2009. "An Alternative Core Inflation Measure," German Economic Review, Verein für Socialpolitik, vol. 10(2), pages 139-164, May.
    • Handle: RePEc:bla:germec:v:10:y:2009:i:2:p:139-164
    DOI: 10.1111/j.1468-0475.2008.00453.x
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    References listed on IDEAS

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    1. Seamus Hogan & Marianne Johnson & Thérèse Laflèche, 2001. "Core Inflation," Technical Reports 89, Bank of Canada.
    2. Michael Pedersen, 2006. "An Alternative Measure of Core Inflation," Working Papers Central Bank of Chile 366, Central Bank of Chile.
    3. Diebold, Francis X & Mariano, Roberto S, 2002. "Comparing Predictive Accuracy," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(1), pages 134-144, January.
    4. Michael F. Bryan & Stephen G. Cecchetti, 1994. "Measuring Core Inflation," NBER Chapters, in: Monetary Policy, pages 195-219, National Bureau of Economic Research, Inc.
    5. Smith, Julie K, 2004. "Weighted Median Inflation: Is This Core Inflation?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 36(2), pages 253-263, April.
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    Cited by:

    1. Edward N. Gamber & Julie K. Smith, 2016. "Time-series measures of core inflation," Working Papers 2016-008, The George Washington University, Department of Economics, H. O. Stekler Research Program on Forecasting.
    2. Alan K. Detmeister, 2011. "The usefulness of core PCE inflation measures," Finance and Economics Discussion Series 2011-56, Board of Governors of the Federal Reserve System (U.S.).
    3. Terence C. Mills, 2013. "Constructing U.K. Core Inflation," Econometrics, MDPI, vol. 1(1), pages 1-21, April.
    4. Alan K. Detmeister, 2012. "What should core inflation exclude?," Finance and Economics Discussion Series 2012-43, Board of Governors of the Federal Reserve System (U.S.).

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