Underlying inflation measures for Germany

Muhsin Ciftci and Elisabeth Wieland

No 04/2025, Technical Papers from Deutsche Bundesbank

Abstract: In this paper, we evaluate a set of measures of underlying inflation for Germany using conventional measures, such as core inflation (excluding energy and food items), and alternative measures based on econometric models, machine learning, and micro-price evidence. We compare these measures through detailed in-sample and out-of-sample evaluations. The alternative measures exhibit lower volatility, minimal bias, and superior out-of-sample forecasting accuracy performance. While we find no evidence that any single measure clearly outperforms the others over time, the range of alternatives measures also reflects a somewhat earlier uptick and downturn in light of the recent inflation surge in comparison to traditional ones. In addition, all measures under consideration are highly sensitive to monetary policy shocks.

Keywords: Underlying inflation; monetary policy; local projections; machine learning (search for similar items in EconPapers)
JEL-codes: C22 E31 E37 (search for similar items in EconPapers)
Date: 2025
New Economics Papers: this item is included in nep-big, nep-cba, nep-eec, nep-for and nep-mon
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:bubtps:333424

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