A Core Inflation Indicator for the Euro Area

By Riccardo Cristadoro, M. Forni, L. Reichlin, Giovanni Veronese. 2005

206 citations recorded by the source corpus.

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.

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/4961e0e259e67671e870ee1ecbd5b77a23490e2c

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Citations in the corpus

A new core inflation indicator for New Zealand (2012, unknown): “…a long-run component χ L jt and a short-run component χ S jt by removing high-frequency, short-run fluctuations up to a given critical period h (Cristadoro et al. 2005): Specifically, the intertemporally smoothed (long-run) common component can be attained by summing waves of different…”
Relative Goods' Prices, Pure Inflation, and the Phillips Correlation (2010, unknown): “Using these methods on price data, Riccardo Cristadoro et al. (2005) estimate a common factor on a panel with price and quantity series and ask a different question: whether it forecasts inflation well.”
Non-Stationary Dynamic Factor Models for Large Datasets (2016, background): “, 2008; Luciani, 2014), in the construction of both business cycle indicators and inflation indexes (Cristadoro et al., 2005; Altissimo et al., 2010), and also in policy analysis based on impulse response functions (Giannone et al.”
A Tale of Two Decades: The Ecb's Monetary Policy at 20 (2019, methodology): “The suite of models encompassed two DSGEs – the CMR and Darracq-Pariès et al. (2011) – and a large-scale BVAR, documented in Altavilla et al.”
Dynamic factor models with infinite-dimensional factor spaces: One-sided representations (2015, background): “, 2005; Boivin and Ng, 2006), (b) business cycle indicators and nowcasting (Cristadoro et al., 2005; Giannone et al., 2008; Altissimo et al., 2010), (c) structural macroeconomic analysis and monetary policy (Bernanke and Boivin, 2003; Bernanke et al.”
New Eurocoin: Tracking Economic Growth in Real Time (2007, methodology): “Integrating (11) and (12) over the interval [−π π], we obtain the following decompositions of the variance-covariance matrix of the x’s:”