A persistence-weighted measure of core inflation in the euro area

Laurent Bilke () and Livio Stracca ()
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Laurent Bilke: Lehman Brothers, 25 Bank Street, London E14 5LE, United Kingdom., http://www.lehman.com
Livio Stracca: Counsel to the Executive Board, European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany., http://www.ecb.europa.eu/home/html/index.en.html

No 905, Working Paper Series from European Central Bank

Abstract: We propose a new core inflation measure for the Euro area which places the emphasis on the more lasting, i.e. persistent, price developments at a disaggregated level. The importance of each component of the HICP is reweighted according to its relative persistence, as measured by the sum of the autoregressive coefficients or by an indicator of mean reversion. Unlike headline inflation, our baseline core inflation measure is highly correlated with ECB monetary policy decisions, which could mean that it contains ex ante (pre monetary policy) information on inflationary pressure. JEL Classification: E31.

Keywords: Core inflation; inflation persistence. (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-eec, nep-mac and nep-mon
Date: 2008-06

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