Measuring Core Inflation

Danny Quah ()

No 1153, CEPR Discussion Papers from C.E.P.R. Discussion Papers

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 co-movements in inflation and output. We construct a measure of core inflation by placing dynamic restrictions on a vector autoregression (VAR) system.

Keywords: Core Inflation; Dynamic Restrictions; Vector Autoregression (search for similar items in EconPapers)
JEL-codes: C3 E3 (search for similar items in EconPapers)
Date: 1995-03
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Related works:
Working Paper: Measuring Core Inflation
Journal Article: Measuring Core Inflation? (1995)
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