Identifying Domestic and Imported Core Inflation

January 1, 2000

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Hilde C. Bjørnland Identifying Domestic and Imported Core Inflation, (USA: International Monetary Fund, 2000) accessed November 22, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper estimates core inflation in Norway, identified as that component of inflation that has no long-run effect on GDP. The model distinguishes explicitly between domestic and imported core inflation. The results show that (domestic) core inflation is the main component of CPI inflation. CPI inflation, however, misrepresents core inflation in some periods. The differences are well explained by the other shocks identified in the model, in particular the oil price shocks of the 1970s when Norway imported inflation, and the negative noncore (supply) shocks of the late 1980s, which pushed inflation up temporarily relative to core inflation.

Subject: Consumer price indexes, Econometric analysis, Inflation, Inflation targeting, Monetary policy, Oil prices, Prices, Vector autoregression

Keywords: Consumer price indexes, Core inflation rate, Core inflation shock, CPI inflation, Domestic and imported core inflation, Inflation, Inflation target, Inflation targeting, Oil price shock, Oil price shocks, Oil prices, Overpredicts core inflation, Price, Structural VAR, VAR model, Vector autoregression, WP

Publication Details

Pages:

25
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2000/004
Stock No:

WPIEA0042000
ISBN:

9781451842036
ISSN:

1018-5941

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