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U.S. CORE INFLATION: A WAVELET ANALYSIS

Published online by Cambridge University Press:  10 June 2010

Kevin Dowd ,
John Cotter  and
Lixia Loh
Kevin Dowd*
Affiliation:
Cass Business School
John Cotter
Affiliation:
University College Dublin
Lixia Loh
Affiliation:
Sheffield Hallam University
*
Address correspondence to: Kevin Dowd, Pensions Institute, Cass Business School, 106 Bunhill Row, London EC1Y 8TZ, United Kingdom; e-mail: Kevin.Dowd@hotmail.co.uk.
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Abstract

This paper proposes the use of wavelet methods to estimate U.S. core inflation. It explains wavelet methods and suggests that they are ideally suited to this task. Comparisons are made with traditional Consumer Price Index–based and regression-based measures for their performance in following trend inflation and predicting future inflation. Results suggest that wavelet-based measures perform better, and sometimes much better, than the traditional approaches. These results suggest that wavelet methods are a promising avenue for future research on core inflation.

Keywords

Core InflationWaveletsTrend InflationInflation Prediction

Information

Type
Articles
Information
Macroeconomic Dynamics , Volume 15 , Issue 4 , September 2011 , pp. 513 - 536
Copyright
Copyright © Cambridge University Press 2010

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