Improving the measurement of core inflation in Colombia using asymmetric trimmed means

The study evaluates the virtues of asymmetric trimmed means as efficient estimators of core inflation for Colombia, an economy with high and variable inflation rates. Results suggest that the proposed indicators are more efficient than alternative indexes and are particularly suited for environments...

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Autor Principal: Jaramillo-Jiménez, Carlos Felipe
Formato: Documento de trabajo (Working Paper)
Lenguaje:Español (Spanish)
Publicado: Banco de la República 1998
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Acceso en línea:http://repositorio.banrep.gov.co/handle/20.500.12134/5110
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spelling oai:RI-BanRep:20.500.12134-51102019-05-20T19:11:19Z Improving the measurement of core inflation in Colombia using asymmetric trimmed means Jaramillo-Jiménez, Carlos Felipe E31 - Price Level; Inflation; Deflation E58 - Central Banks and Their Policies Inflation Colombia Inflación -- Mediciones -- Colombia E58 - Bancos centrales y sus políticas E31 - Nivel de precios; Inflación; Deflación The study evaluates the virtues of asymmetric trimmed means as efficient estimators of core inflation for Colombia, an economy with high and variable inflation rates. Results suggest that the proposed indicators are more efficient than alternative indexes and are particularly suited for environments where price change distributions are non-normal. Computations indicate that an optimally trimmed estimator for the 27-component Colombian CPI during the 1972:06 to 1997: 12 period requires that 12 percent be trimmed from the upper tail and 24 percent from the lower tail. This indicator exhibits substantially higher efficiency than the weighted average of price changes (i-e.,CPI inflation), the CPI excluding food and energy, the median and symmetric trimmmed means. These findings are robust to changes in the 36-month centered moving average benchmarck of annual inflation. the medain and symmmetric trimmed means. These findings are robust changes in the 36-month centerd moving average benchmark of annual inflation. The optimal estimator is not found to be robust to changes in data sample. This is likely due to changes in parameters of the underying data distribution due to structural changes in the Colombian economy, particularly in the post-1990 period. Optimal levels of asymmetrical trimming are also found to be highly sensitive to the degree of disaggregation of the CPI data. This is expected since greater disaggregation reveals higher kurtosis and skewness of the underying data. The CPI excluding food and energy and the median do not seem to provide persistent efficiency gaings in estimation of inflation with respect to the weighted mean. Food and energy prices are critical sectors of middle income economies such as Colombia and contain valuable information about medium and long-term trends in inflation. Finally, the median excludes many prices-especially those in the upper tail- that seem to contain valuable information about long-term trends in inflation. 1998-04-06 1998-04-06 Working Paper Documentos de trabajo Published Version http://repositorio.banrep.gov.co/handle/20.500.12134/5110 http://hdl.handle.net/20.500.12134/5110 spa Documentos de Trabajo Borradores de Economía Borradores de Economía; No. 91 https://ideas.repec.org/p/bdr/borrec/091.html https://ideas.repec.org/p/col/000094/002818.html Open Access https://creativecommons.org/licenses/by-nc-sa/4.0/ Acceso abierto Atribucion-NoComercial-CompartirIgual CC BY-NC-SA 4.0 Las opiniones contenidas en el presente documento son responsabilidad exclusiva de los autores y no comprometen al Banco de la República ni a su Junta Directiva. PDF application/pdf image/jpeg image/jpeg image/jpeg image/jpeg image/jpeg image/jpeg Bogotá Banco de la República
institution Repositorio Institucional del Banco de la República de Colombia
collection DSpace
language Español (Spanish)
topic E31 - Price Level; Inflation; Deflation
E58 - Central Banks and Their Policies
Inflation
Colombia
Inflación -- Mediciones -- Colombia
E58 - Bancos centrales y sus políticas
E31 - Nivel de precios; Inflación; Deflación
spellingShingle E31 - Price Level; Inflation; Deflation
E58 - Central Banks and Their Policies
Inflation
Colombia
Inflación -- Mediciones -- Colombia
E58 - Bancos centrales y sus políticas
E31 - Nivel de precios; Inflación; Deflación
Jaramillo-Jiménez, Carlos Felipe
Improving the measurement of core inflation in Colombia using asymmetric trimmed means
description The study evaluates the virtues of asymmetric trimmed means as efficient estimators of core inflation for Colombia, an economy with high and variable inflation rates. Results suggest that the proposed indicators are more efficient than alternative indexes and are particularly suited for environments where price change distributions are non-normal. Computations indicate that an optimally trimmed estimator for the 27-component Colombian CPI during the 1972:06 to 1997: 12 period requires that 12 percent be trimmed from the upper tail and 24 percent from the lower tail. This indicator exhibits substantially higher efficiency than the weighted average of price changes (i-e.,CPI inflation), the CPI excluding food and energy, the median and symmetric trimmmed means. These findings are robust to changes in the 36-month centered moving average benchmarck of annual inflation. the medain and symmmetric trimmed means. These findings are robust changes in the 36-month centerd moving average benchmark of annual inflation. The optimal estimator is not found to be robust to changes in data sample. This is likely due to changes in parameters of the underying data distribution due to structural changes in the Colombian economy, particularly in the post-1990 period. Optimal levels of asymmetrical trimming are also found to be highly sensitive to the degree of disaggregation of the CPI data. This is expected since greater disaggregation reveals higher kurtosis and skewness of the underying data. The CPI excluding food and energy and the median do not seem to provide persistent efficiency gaings in estimation of inflation with respect to the weighted mean. Food and energy prices are critical sectors of middle income economies such as Colombia and contain valuable information about medium and long-term trends in inflation. Finally, the median excludes many prices-especially those in the upper tail- that seem to contain valuable information about long-term trends in inflation.
format Documento de trabajo (Working Paper)
author Jaramillo-Jiménez, Carlos Felipe
author_facet Jaramillo-Jiménez, Carlos Felipe
author_sort Jaramillo-Jiménez, Carlos Felipe
title Improving the measurement of core inflation in Colombia using asymmetric trimmed means
title_short Improving the measurement of core inflation in Colombia using asymmetric trimmed means
title_full Improving the measurement of core inflation in Colombia using asymmetric trimmed means
title_fullStr Improving the measurement of core inflation in Colombia using asymmetric trimmed means
title_full_unstemmed Improving the measurement of core inflation in Colombia using asymmetric trimmed means
title_sort improving the measurement of core inflation in colombia using asymmetric trimmed means
publisher Banco de la República
publishDate 1998
url http://repositorio.banrep.gov.co/handle/20.500.12134/5110
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score 10,793037