Measures of Underlying Inflation in Sri Lanka

Souvik Gupta and Magnus Saxegaard

No 2009/167, IMF Working Papers from International Monetary Fund

Abstract: During the first half of 2008, Sri Lanka witnessed significantly higher inflation than most other emerging Asian countries. Inflation has since declined amid declining world commodity prices and tight monetary policy. Given the sensitivity to global commodity prices, a core inflation measure could be useful for monetary policy. The purpose of this paper is to compare the performance of Sri Lanka's existing official measure of core inflation against alternative measures. Our findings suggest that the existing measure does contain information about the future path of headline information, but may be inadequate as a communication tool for the Central Bank.

Keywords: WP; core inflation; headline inflation; core inflation rate; Sri Lanka; Monetary Policy; core inflation measure; measure of core inflation; core inflation granger; world commodity price shock; core inflation benefit; Inflation; Consumer price indexes; Cyclical indicators; Food prices; Fuel prices (search for similar items in EconPapers)
Pages: 22
Date: 2009-08-01
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Citations: View citations in EconPapers (8)

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