An alternative measure of core inflation

Working paper no 33, 2005

Authors Pedersen, Michael
Subject International Economy; USA; Euro area; Inflation, wages and prices
Type Working paper
Year 2005
Published 13 December 2005
We combine the ideas of the trimmed mean and the Edgeworth index to construct an alternative measure of core inflation named "Trim of Most Volatile Components (TMVC)". At each point of time this measure trims away the components of the price index, which have been most volatile in the past. TMVC tracks trend inflation better than other core inflation measures in the euro zone, but in the US the evidence is weaker.