Stability price index, core inflation and output volatility

Wojciech Charemza and Imran Hussain Shah

Applied Economics Letters, 2013, vol. 20, issue 8, 737-741

Abstract: This article examines the relationship between the ‘exclusion’ type Core Inflation ( CI ) measures and the stability price index. Empirical results for Malaysia and Pakistan suggest that if targeting CI index is to stabilize output, weights of the export-oriented sectors (energy for Malaysia and foodstuffs for Pakistan) should be reduced, in relation to the CPI weights, and weights of the import-oriented sectors should be increased. It also indicates that, in order to maintain real sector stability, central bankers should include the fundamental component of the stock market prices in the price index they target.

Date: 2013
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Working Paper: Stability Price Index, Core Inflation and Output Volatility (2012)
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DOI: 10.1080/13504851.2012.739279

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