Measuring Us Core Inflation: A Common Trends Approach

Posted: 8 May 2003

See all articles by Fabio C. Bagliano

Fabio C. Bagliano

University of Turin - Department of Economics and Statistics; Center for Research on Pensions and Welfare Policies (CeRP); University of Turin - Collegio Carlo Alberto

Claudio Morana

Università di Milano Bicocca; Università degli Studi di Milano-Bicocca - Department of Economics, Management and Statistics (DEMS); Università degli Studi di Milano-Bicocca - Center for European Studies (CefES); Center for Economic Research on Pensions and Welfare Policies (CeRP); Rimini Center for Economic Analysis - Europe ETS; Rimini Center for Economic Analysis - HQ

Abstract

In this paper the long-run trend in CPI inflation (core inflation) for the US over the 1960-2000 period is estimated using a common trends model. In this framework, core inflation is interpreted and constructed as the long-run forecast of inflation conditional on the information contained in nominal money growth, output fluctuations and movements in the oil price. Unlike other commonly used measures of core inflation, the common-trends core inflation rate exploits the long-run link between inflation and monetary growth, a strong feature of the data.

Keywords: Core inflation, common trends, US

JEL Classification: C32, E31, E52

Suggested Citation

Bagliano, Fabio C. and Morana, Claudio, Measuring Us Core Inflation: A Common Trends Approach. Journal of Macroeconomics, Vol. 25, pp. 197-212, 2003, Available at SSRN: https://ssrn.com/abstract=390060

Fabio C. Bagliano (Contact Author)

University of Turin - Department of Economics and Statistics ( email )

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Claudio Morana

Università di Milano Bicocca ( email )

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