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Core Inflation and Trend Inflation

Author(s): Stock, James H.; Watson, Mark W.

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Abstract: This paper examines empirically whether the measurement of trend inflation can be improved by using disaggregated data on sectoral inflation to construct indexes akin to core inflation but with a time-varying distributed lags of weights, where the sectoral weight depends on the timevarying volatility and persistence of the sectoral inflation series and on the comovement among sectors. The modeling framework is a dynamic factor model with time-varying coefficients and stochastic volatility as in Del Negro and Otrok (2008), and is estimated using U.S. data on seventeen components of the personal consumption expenditure inflation index.
Publication Date: 28-Sep-2016
Citation: Stock, James H, Watson, Mark W. (2016). Core Inflation and Trend Inflation. Review of Economics and Statistics, 98 (4), 770 - 784. doi:10.1162/REST_a_00608
DOI: doi:10.1162/REST_a_00608
ISSN: 0034-6535
EISSN: 1530-9142
Pages: 770 - 784
Type of Material: Journal Article
Journal/Proceeding Title: Review of Economics and Statistics
Version: Final published version. Article is made available in OAR by the publisher's permission or policy.

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