Relative Prices, Inflation and Core Inflation

March 1, 2000

Preview Citation

Format: Chicago

Scott Roger. Relative Prices, Inflation and Core Inflation, (USA: International Monetary Fund, 2000) accessed October 10, 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

Empirical evidence on the distribution of relative price changes almost invariably reveals high kurtosis and a tendency toward right-skewness. Simple mixed distribution models including volatile and infrequently adjusted prices can account for these and other common features, such as correlation between the mean and variance of relative prices. In such circumstances, robust measures of central tendency are likely to outperform the mean or standard measures of “core” inflation as indicators of generalized inflation. The analysis also supports the use of geometric averaging in CPI construction and the targeting of the geometric mean inflation rate rather than the Laspeyres mean.

Subject: Consumer price indexes, Consumer prices, Inflation, Population and demographics, Price indexes, Prices

Keywords: Arithmetic mean, Central tendency, Consumer price indexes, Consumer prices, Inflation, Mean, Measurement difficulties, Population mean, Price, Price change, Price indexes, Price movement, Price relative, Relative prices, WP

Publication Details

Pages:

43
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2000/058
Stock No:

WPIEA0582000
ISBN:

9781451847857
ISSN:

1018-5941

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