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Measuring core inflation

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

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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
Divisions: Centre for Economic Performance
Economics
Subjects: H Social Sciences > HB Economic Theory
Date Deposited: 27 Apr 2007
Last Modified: 21 Sep 2024 21:03
URI: http://eprints.lse.ac.uk/id/eprint/2090

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