Some Measures of Core Inflation and Their Evaluations in Nepal
This paper measures core inflation and evaluates their performance in Nepal. Concept of core inflation and survey of methodologies as well as international experiences and empirical evidence have been reviewed and analysed before measuring the core inflation in Nepal. An existence of asymmetric price distribution necessitates thealternative measure of inflation in place of traditional CPI-based headline inflation. Ultimately, by using exclusion method and stochastic measures, nine different types of core inflations have been computed. Empirical results show that core inflations perform better than the headline inflation in several aspects such as having less volatility, highly relating to money supply growth, and capturing the permanent component of headline inflation. Better core inflation is selected with the help of different performance criteria such as observing statistical properties, tracking trend inflation, finding the relationship with money supply, and the analysing the ability of capturing permanent component and forecasting capacity. However, no single core measure performs better in all aspects. Hence, a set of core inflation measures, namely exclusion based, weighted median and trimmed mean should be analysed in conducting the monetary policy in Nepal.
Year of publication: |
2006
|
---|---|
Authors: | Shrestha, Prakash Kumar |
Published in: |
2014, Volume 26, Issue 2. - Nepal Rastra Bank. - Vol. 18.2006, April, p. 37-69
|
Publisher: |
Nepal Rastra Bank |
Saved in:
freely available
Saved in favorites
Similar items by person
-
Banking systems, central banks and international reserve accumulation in East Asian economies
Shrestha, Prakash Kumar, (2012)
-
Banking Ssystems, central banks and international reserve accumulation in East Asian economies
Shrestha, Prakash Kumar, (2013)
-
Khanal, Dilli Raj, (2008)
- More ...