Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/60854
Authors: 
Amstad, Marlene
Potter, Simon
Year of Publication: 
2009
Series/Report no.: 
Staff Report, Federal Reserve Bank of New York 420
Abstract: 
Central banks analyze a wide range of data to obtain better measures of underlying inflationary pressures. Factor models have widely been used to formalize this procedure. Using a dynamic factor model this paper develops a measure of underlying inflation (UIG) at time horizons of relevance for monetary policymakers for both CPI and PCE. The UIG uses a broad data set allowing for high-frequency updates on underlying inflation. The paper complements the existing literature on U.S. 'core' measures by illustrating how UIG is used and interpreted in real time since late 2005.
Subjects: 
Inflation
dynamic factor models
core inflation
monetary policy
forecasting
JEL: 
C13
C33
C43
E31
E37
Document Type: 
Working Paper

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