There is currently a policy debate on potential refinements to monetary policy regimes in countries with low and stable inflation such as the U.S. and Canada. For example, in Canada, a systematic review of the current inflation targeting framework is underway. An issue that has generally...

The author constructs a measure of core inflation using a structural vector autoregression containing oil-price growth, output growth, and inflation. This macro-founded measure of inflation forecasts total inflation at least as well as other, atheoretical measures.