Time-series measures of core inflation

Edward N. Gamber () and Julie Smith
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Edward N. Gamber: Congressional Budget Office

No 2016-008, Working Papers from The George Washington University, Department of Economics, H. O. Stekler Research Program on Forecasting

Abstract: Most papers examining the measurement of core inflation, such as the weighted median, have focused on cross-section information in the disaggregated inflation data. This paper improves on the literature by introducing new measures, based on a definition of core inflation as the best predictor of future inflation that exploits the time-series information in the disaggregated inflation data. Exploiting the time-series information in disaggregated or component inflation data produces better forecasts. Additionally, the best new measure comes from jointly estimating the optimal weights instead of imposing weights based on the persistence of the components or the underlying factors estimated by principal components.

Keywords: Core inflation; inflation; forecasting; disaggregated components; principal components (search for similar items in EconPapers)
JEL-codes: E31 E37 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2016-09
New Economics Papers: this item is included in nep-mac and nep-mon
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