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Performance of Core Inflation Measures

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Abstract

This paper assesses the performance of core inflation measures based on the structural VAR approach. Since core or monetary inflation is not directly observable, we develop a monetary general equilibrium model that fits real aggregated European data and we use this model to generate time series for headline as well as core inflation. For five different schemes which attempt to identify core inflation within a VAR framework it is investigated whether the estimated core inflation series recover the true series sufficiently precise in order to be useful for monetary policy.

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Authors
  1. C.K. Folkertsma
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  2. K. Hubrich
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Folkertsma, C., Hubrich, K. Performance of Core Inflation Measures. De Economist 149, 455–508 (2001). https://doi.org/10.1023/A:1014631118173

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