Working Paper

Tracking Trend Inflation: Nonseasonally Adjusted Variants of the Median and Trimmed-Mean CPI

Abstract: We make five contributions. We demonstrate that extant trimmed-mean and median CPI construction procedures depart from Bureau of Labor Statistics index construction procedures, and that the departures don't make much of a difference. We produce nonseasonally adjusted variants of the trimmed-mean CPI and median CPI, and demonstrate that these are useful real-time estimates of trend inflation; the NSA median CPI outperforms the median CPI, but both SA and NSA variants of the median and the trimmed-mean CPI easily dominate the so-called "core" CPI. We introduce superior ex post measures of trend inflation. We demonstrate that a small amount of time-series averaging reaps large rewards. Finally, we discuss using model-averaging as a new direction for simple and robust trend inflation indicators.

Keywords: inflation measurement; trend inflation; time averaging; seasonal adjustment; trimmed-mean inflation estimators;

JEL Classification: E31; E32; E37;

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Bibliographic Information

Provider: Federal Reserve Bank of Cleveland

Part of Series: Working Papers (Old Series)

Publication Date: 2015-11-06

Number: 1527