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Evaluating the underlying inflation measures for Russia

Author

Listed:
  • Elena Deryugina

    (Bank of Russia, Russian Federation)

  • Alexey Ponomarenko

    (Bank of Russia, Russian Federation)

  • Andrey Sinyakov

    (Bank of Russia, Russian Federation)

  • Konstantin Sorokin

    (NRU-HSE, Russian Federation)

Abstract

Underlying inflation indicators can be useful for the monetary policy of the inflation targeting central bank when inflation indicators help separate a change in relative prices from true inflation, as well as when they allow assessing medium-term inflation risks. We apply various methods frequently used in practice to calculate 20 underlying inflation indicators for Russia in the pseudo-real time. We apply three types of tests to these measuring instruments: tests for economic content and the ability to forecast future inflation, as well as a set of technical tests. We find that inflation indicators cal-culated on the basis of dynamic factor models emerge as the best performing candidates. The dynamics of the ob-tained range of underlying inflation measures in 2014 compared with headline inflation indicates that the accelerated growth in consumer prices was not fully reflected in underlying inflation dynamics.

Suggested Citation

  • Elena Deryugina & Alexey Ponomarenko & Andrey Sinyakov & Konstantin Sorokin, 2015. "Evaluating the underlying inflation measures for Russia," Bank of Russia Working Paper Series wps4, Bank of Russia.
    • Handle: RePEc:bkr:wpaper:wps4
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    Cited by:

    1. Elena Deryugina & Alexey Ponomarenko, 2020. "Disinflation and Reliability of Underlying Inflation Measures," Central European Journal of Economic Modelling and Econometrics, Central European Journal of Economic Modelling and Econometrics, vol. 12(1), pages 91-111, March.
    2. Elena Deryugina & Natalia Karlova & Alexey Ponomarenko & Anna Tsvetkova, 2019. "The role of regional and sectoral factors in Russian inflation developments," Economic Change and Restructuring, Springer, vol. 52(4), pages 453-474, November.
    3. Alexey Ponomarenko, 2016. "Measuring Domestically Generated Inflation," Bank of Russia Working Paper Series note2, Bank of Russia.
    4. Vadim Napalkov & Anna Novak & Andrey Shulgin, 2021. "Variations in the Effects of a Single Monetary Policy: The Case of Russian Regions," Russian Journal of Money and Finance, Bank of Russia, vol. 80(1), pages 3-45, March.

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    More about this item

    Keywords

    Underlying inflation; core inflation; monetary inflation; dynamic factor model; Russia;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

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