A Core Inflation Indicator for the Euro Area.
This paper proposes a new core inflation indicator for the euro area, obtained by "cleaning" monthly price changes from short-run volatility, idiosyncratic, and measurement errors. We use a factor model to "project" monthly inflation on a large panel of time series. Exploiting multivariate information we obtain a satisfactory degree of smoothing without using backward looking moving averages, which induce a time delay in the signal. The indicator forecasts inflation and is a useful tool for policy makers. It outperforms other commonly used predictors at 6 months and longer horizons. It tracks past policy interventions of the ECB.
Year of publication: |
2005
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Authors: | Cristadoro, Riccardo ; Forni, Mario ; Reichlin, Lucrezia ; Veronese, Giovanni |
Published in: |
Journal of Money, Credit and Banking. - Blackwell Publishing. - Vol. 37.2005, 3, p. 539-60
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Publisher: |
Blackwell Publishing |
Saved in:
Saved in favorites
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