Measures of Trend Inflation in Hong Kong

Frank Leung (), Kevin Chow and Simon Chan
Additional contact information
Kevin Chow: Research Department, Hong Kong Monetary Authority
Simon Chan: Research Department, Hong Kong Monetary Authority

No 907, Working Papers from Hong Kong Monetary Authority

Abstract: The concept of trend inflation is crucial for macroeconomic analysis and policy formulation by central banks. In this paper, we compare measures of trend inflation in Hong Kong estimated by the exclusion and statistical methods. Our findings suggest that the trend inflation estimated by the exclusion method (by excluding basic food, energy and other volatile items) and the principal component technique have strong predictive power on future changes in headline CPI or PCE inflation. Evaluation results based on qualitative and quantitative criteria suggest that the two estimation methods have their own strengths and weaknesses, and none of the methods has clear absolute advantage over the other for measuring trend inflation.

Keywords: Core inflation; trend inflation; co-integration (search for similar items in EconPapers)
JEL-codes: C22 E31 E37 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2009-04
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
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Citations: View citations in EconPapers (2)

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http://www.info.gov.hk/hkma/eng/research/working/pdf/HKMAWP09_07_full.pdf (application/pdf)

Related works:
Chapter: Measures of trend inflation in Hong Kong (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:hkg:wpaper:0907

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