Design and Evaluation of Core Inflation Measures for Turkey

Oguz Atuk () and Utku Ozmen

Working Papers from Research and Monetary Policy Department, Central Bank of the Republic of Turkey

Abstract: This study analyzes core inflation concept for Turkey from the perspective of design and evaluation. To our best knowledge, this is the first study to evaluate the performance of the core inflation measures for Turkey. We first define and calculate new core inflation indicators using the disaggregated price data for the time period of January 1994 to June 2007. The core inflation measures developed in this paper include weighted median, trimmed mean and volatility-based measures along with the permanent exclusion-based methods. Later, we evaluate the performance of the core inflation measures with regards to pre-defined criteria including unbiasedness, reduced volatility, trend tracking ability and predictive ability. Considering the significant shift in the inflation process in Turkey, we split the sample into two as pre- and post-2003 when evaluating the performance of the core inflation measures. Overall, no single core inflation indicator stands out alone as �the core� and therefore different core measures should be followed simultaneously to get a better understanding of the real trend of inflation and to identify various shocks hitting the inflation. However, limited influence estimators and volatility-based core measures perform relatively better compared to permanent exclusion-based methods. The study also provides an extensive analysis of the distribution of price changes at various aggregation levels.

Keywords: Inflation; core inflation; Turkey (search for similar items in EconPapers)
JEL-codes: C13 C22 C43 E31 (search for similar items in EconPapers)
Date: 2009
New Economics Papers: this item is included in nep-ara, nep-cba, nep-cwa, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Working Paper: Design and evaluation of core inflation measures for Turkey (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:tcb:wpaper:0903

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