Measuring Core Inflation for Tunisia
The Empirical Economics Letters, 7(12): (December 2008) ISSN 1681 8997
12 Pages Posted: 19 Dec 2013
Date Written: December 28, 2008
Abstract
This paper will derive a core inflation measure for Tunisia. The core inflation is estimated as the permanent component of headline inflation within the common trends and common cycles model allowing for both short (common cycles) and long-run (common trends) co-movements restrictions. The forecast ability of the estimated core inflation is then compared to the one of the estimated core inflation from common trends model (with only long-run co-movements restrictions). The out-of-sample analysis points towards the common trends and common cycles core inflation measure as being the best to predict the future inflationary trend.
Keywords: Trend-cycle decomposition, Common Cycles, Cointegration, Core inflation
JEL Classification: C32, C53, E31, E32, E52
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