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Methods of Measuring Core Inflation in Inflation Targeting Countries
Keywords
core inflation, statistical measures, trimmed mean, weighted median, monetary factors
Abstract
This article tackles the issue of the transitory effects on growth of prices and the main methods for the calculation of monetary policy relevant inflation in inflation targeting countries. In order to have an indicator which would capture the medium term inflation pressures, several measures of core inflation are considered. Besides that this article mentions the main advantages and disadvantages of the different measures of medium term inflation pressures. Most of the central banks which are implementing the inflation targeting regime are using core inflation indicators based on the exclusion of certain components, however there are several central banks which are using statistical measures of core inflation such as the trimmed mean and weighted median. This article also describes the existing core inflation indicators as well as the main features of the trimmed mean and weighted median for the Republic of Moldova. Even though the obtained indicators of core inflation have different values, they have similar trajectories.