A New Core Inflation Indicator for Turkey

Necati Tekatli

Central Bank Review, 2010, vol. 10, issue 2, 9-21

Abstract: This paper has two main objectives. The first objective is to propose a new indicator of core inflation, which is obtained by idiosyncratic dynamics and cleaning month on month relative price fluctuations from overall price changes. We use a factor model with the subcomponents of CPI inflation to extract this new core indicator. The second objective is to evaluate the performance of this new indicator and two widely used core indicators for Turkey, H and I, by the help of four criteria designed to assess the informativeness and the predictive power of these series for the analysis of headline inflation. The results suggest that the new indicator, Fcore, is a good measure of core inflation and a useful tool for policy analysis. Moreover, the core indicator H is a more informative measure of core inflation compared to core indicator I.

Keywords: Inflation; Core inflation; Factor model; Bayesian time series (search for similar items in EconPapers)
JEL-codes: C11 E31 E58 (search for similar items in EconPapers)
Date: 2010
References: View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:tcb:cebare:v:10:y:2010:i:2:p:9-21

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