Implementing and interpreting indicators of core inflation: the case of France

Franck Sedillot () and Hervé Le Bihan

Empirical Economics, 2002, vol. 27, issue 3, 473-497

Abstract: This paper presents a comparison of alternative indicators of underlying or "core" inflation in the French case. Four broad measures are considered and implemented. The first two are inflation excluding food and energy, and the trimmed inflation indicator. We then implement two methods relying on time-series models: the Dynamic Factor Index and the structural VAR approach. Each indicator stresses on a particular type of shock on the inflation rate, so that no simple ranking of the measures emerges. Combining the various indicators conveys valuable information for appraising short term inflation developments. As regards theoretical interpretation, no indicator is fully satisfactory, lacking an explicit representation of monetary policy. However, comparing forecast performance with respect to inflation provides some specific support in favor of trimmed mean indicators.

Keywords: Core inflation; Trimmed mean estimators; Dynamic Factor Index (search for similar items in EconPapers)
JEL-codes: E31 (search for similar items in EconPapers)
Date: 2002-04-26
Note: received: January 2000/Final version received: March 2001
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Citations: View citations in EconPapers (7)

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