Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/101031
Authors: 
Meyer, Brent
Venkatu, Guhan
Year of Publication: 
2014
Series/Report no.: 
Working Paper, Federal Reserve Bank of Atlanta 2014-3
Abstract: 
This paper reinvestigates the performance of trimmed-mean inflation measures some 20 years since their inception, asking whether there is a particular trimmed-mean measure that dominates the median consumer price index (CPI). Unlike previous research, we evaluate the performance of symmetric and asymmetric trimmed means using a well known equality of prediction test. We find that there is a large swath of trimmed means that have statistically indistinguishable performance. Also, although the swath of statistically similar trims changes slightly over different sample periods, it always includes the median CPI - an extreme trim that holds conceptual and computational advantages. We conclude with a simple forecasting exercise that highlights the advantage of the median CPI (and trimmed-mean estimators in general) relative to other standard measures in forecasting headline inflation.
Subjects: 
inflation
inflation forecasting
trimmed-mean estimators
JEL: 
E31
E37
Document Type: 
Working Paper

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