How Well Does 'Core' Inflation Capture Permanent Price Changes?

Published: May 1, 2013
Abstract
Does excluding food and energy prices from the Consumer Price Index (CPI) produce a measure that captures permanent price changes? To examine this question we decompose CPI inflation and “core” inflation into their permanent and transitory components using a correlated unobserved components model. One of the key aspects of the correlated unobserved components model is that it allows shocks to the permanent component to potentially be more...
Paper Details
Title
How Well Does 'Core' Inflation Capture Permanent Price Changes?
Published Date
May 1, 2013
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