Alternative Measures of Core Inflation in Romania

by Pelinescu, Elena and Dospinescu, Andrei Silviu
Published in Romanian Journal of Economic Forecasting, 2008, volume 9 issue 1, 134-148

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The paper intends to present synthetically the main approaches to computing core inflation, taking into consideration the importance of core inflation for conducting monetary policy. At the same time, the paper computes different measures of core inflation using methods based on excluding certain categories of prices from overall inflation rate and methods based on excluding from the overall inflation rate temporary movements of various prices which at different moments register extremely high volatility (using trimmed methodology). For the monetary policies it is important to select the inflation indicator with the lowest volatility. In this respect, the paper analyzes the efficiency of the computed core inflation indicators using a statistical approach. At the same time, the paper analyzes the usefulness of core indicators for monetary policy measures.

Keywords: core inflation, price stability, methods of computation
JEL Classification: E31, E37, C53, P22