Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/192184 
Year of Publication: 
1997
Series/Report no.: 
Discussion Papers No. 200
Publisher: 
Statistics Norway, Research Department, Oslo
Abstract: 
This paper calculates core inflation, by imposing long run restrictions on a structural vector autoregression (VAR) model containing the growth rate of output, inflation and oil prices. Core inflation is identified as that component in inflation that has no long run effect on output. No restrictions are placed on the response of output and inflation to the oil price shocks. The analysis is applied to Norway and the United Kingdom, both oil producing OECD countries. A model that distinguishes between domestic and imported inflation, is also specified for Norway. In both countries, core inflation is a prime mover of CPI (RPI) inflation. However, CPI (RPI) inflation overvalues or undervalues core inflation in many periods, of which oil price shocks are important sources behind this deviation for prolonged periods
Subjects: 
Core inflation
inflation target
long-run neutrality
oil price shocks
imported inflation
structural VAR.
JEL: 
C32
E31
E61
Document Type: 
Working Paper

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