Core inflation in the Euro area: an application of the generalized dynamic factor model

  • Since the second half of the nineties the euro area has been subject to a considerable accumulation of temporary and idiosyncratic price shocks. Core inflation indicators for the euro area are thus of utmost interest. Based on euro area-wide data core inflation in this paper is analyzed by means of an indicator derived from the generalized dynamic factor model. This indicator reveals that HICP inflation strongly exaggerated both the decline as well as the increase in the price trend in 1999 and 2000/2001. Our results reinforce those achieved by Cristadoro, Forni, Reichlin and Versonese (2001) based on euro area country data which indicates the robustness of the indicator. Klassifikation: C33, E31

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Author:Elke Hahn
Parent Title (German):Center for Financial Studies (Frankfurt am Main): CFS working paper series ; No. 2001,11
Series (Serial Number):CFS working paper series (2002, 11)
Document Type:Working Paper
Year of Completion:2002
Year of first Publication:2002
Publishing Institution:Universitätsbibliothek Johann Christian Senckenberg
Release Date:2005/06/13
Tag:Core Inflation; Euro Area; Generalized Dynamic Factor Model; Principal Component Analysis
GND Keyword:Europäische Union; Wirtschafts- und Währungsunion; Inflation; Preisindex der Lebenshaltung; Verbraucherpreisindex; Lebenshaltungskosten; Faktorenanalyse; Schätzung
Issue:September 2002
Institutes:Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS)
Dewey Decimal Classification:3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft
JEL-Classification:C Mathematical and Quantitative Methods / C3 Multiple or Simultaneous Equation Models / C33 Models with Panel Data
Licence (German):License LogoDeutsches Urheberrecht