ESTIMATING CORE INFLATION IN NORWAY

Fabio Di Dio () and Francesco Felici

Journal of Applied Economic Sciences, 2009, vol. 4, issue 3(9)_Fall2009

Abstract: Central banks are continually considering the problem of how to identify which price changes should be considered permanent and which entirely temporary. Indeed, due to the delayed effect that monetary policy uses to put its choices into action, a wrong valuation of the type of inflation can prove extremely costly for the economy and does not produce the desired results. Since price indexes (as CPI) deliver a distorted picture of underlying inflation, it is necessary to devise a more appropriate target for monetary policy. The need to find a good measure for the latter variable becomes more marked when the central bank adopts price stability as the overriding aim of monetary policy. In this paper we apply the Quah and Vahey (1995) methodology to Norway, oil producing OECD country, and derive measures of core inflation by imposing restrictions from economic theory within the context of a multivariate econometric analysis. To estimate long-term movements of inflation, we present two models that enable the distinction between core and non-core inflation and also between domestic and imported inflation. We conclude that in all the models presented core inflation is a �prime mover� of inflation.

Keywords: Core inflation; Monetary Policy; Norway (search for similar items in EconPapers)
Date: 2009
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.jaes.reprograph.ro/articles/fall2009/diDioF_FeliciF.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ush:jaessh:v:4:y:2009:i:3(9)_fall2009:72

Access Statistics for this article

Journal of Applied Economic Sciences is currently edited by Laura Stefanescu

More articles in Journal of Applied Economic Sciences from Spiru Haret University, Faculty of Financial Management and Accounting Craiova Contact information at EDIRC.
Bibliographic data for series maintained by Laura Stefanescu ().