Abstract
In countries with high inflation, as is the case of Brazil, the traditional cores inflation do not seem to deliver much information about the general level of prices. Therefore, we present a new measure, the Triple-Filter core inflation, which filters inflation in three ways: trimmed mean with smoothed items, seasonal adjustment and moving averages. The results allow us to say that the Triple-Filter core inflation, in addition to providing more information about the inflation trajectory than traditional core inflation, provides a more up-to-date view on the state of inflation than the accumulated inflation over 12 months.
Highlights
The core inflation measures are used by monetary authorities as a tool to measure the stabilization of prices in the economy
We conclude that no core inflation measure has optimum performance when considering all the analyzed criteria
It can be favorably concluded using the core inflation, since the coefficient β is significant for the two time horizons
Summary
The core inflation measures are used by monetary authorities as a tool to measure the stabilization of prices in the economy. The consensus is that the change in the price level, despite being a monetary phenomenon, can be influenced by non-monetary events such as, for example, bad weather conditions that make food prices more expensive because of a reduced supply of these products to the population. Since this event is temporary, with an improving climate food prices may fall again. An inflation measure free of such interference is desirable
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