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Measuring core inflation

Quah, Danny and Vahey, Shaun P (1995) Measuring core inflation. CEP discussion paper; CEPDP0254, 254. Centre for Economic Performance, London School of Economics and Political Science, London, UK.

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Identification Number: 254

Abstract

In this paper we argue that measured (RPI) inflation is conceptually mismatched with core inflation: the difference is more than just "measurement error". We propose a technique for measuring core inflation, based on an explicit long-run economic hypothesis. Core inflation is defined as that component of measured inflation that has no (medium-to) long-run impact on real output - a notion that is consistent with the vertical long-run Phillips curve interpretation of the co-movement in inflation and output. We construct a measure of core inflation by placing dynamic restrictions on a vector autoregression (VAR) system.

Item Type: Monograph (Discussion Paper)
Official URL: http://cep.lse.ac.uk
Additional Information: © 1995 the authors
Subjects: H Social Sciences > HB Economic Theory
Sets: Collections > Economists Online
Research centres and groups > Centre for Economic Performance (CEP)
Departments > Economics
Series: Working Papers > CEP Discussion Papers
Date Deposited: 27 Apr 2007
Last Modified: 14 Nov 2012 10:19
URI: http://eprints.lse.ac.uk/id/eprint/2090

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