The Recent Performance of the Traditional Measure of Core Inflation in G7 Countries

Luciana Lo Bue () and Antonio Ribba ()

Center for Economic Research (RECent) from University of Modena and Reggio E., Dept. of Economics "Marco Biagi"

Abstract: In this paper we undertake an empirical investigation concerning the performance of the traditional measure of core inflation in recent years. We consider the group of G7 countries and explore both the high-frequency and the low-frequency relations between overall inflation and core inflation. We find that the traditional core measure, obtained by subtracting from the overall index those components which exhibit high volatility and which are responsible for the short-run variability of inflation, is a reliable indicator of trend inflation for a group of countries including the USA, Canada and Japan. The innovation accounting shows that for the three countries the transitory shock, i.e. the total inflation shock, has limited persistence and hence there is a relatively quick convergence of overall inflation to its trend component.

Keywords: Core Inflation Indicator; Structural Cointegrated VARs; Permanent-transitory Decompositions (search for similar items in EconPapers)
JEL-codes: C43 E31 (search for similar items in EconPapers)
Pages: pages 27
Date: 2009-12
New Economics Papers: this item is included in nep-cba and nep-mon
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Journal Article: The Recent Performance of the Traditional Measure of Core Inflation in G7 Countries (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:mod:recent:037

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