Affiliation:
1. Federal Reserve Bank of Cleveland
Abstract
We construct a nonseasonally adjusted version of the Cleveland Fed’s median CPI (“NSA-median”) and compare its performance as a measure of trend inflation to the median CPI and the core CPI. We investigate a month-over-month form of both median measures as well as forms with varying amounts of time aggregation. We find that both the median CPI and the NSA-median are considerably better at tracking trend inflation than the core CPI. We also find that a mere three months of time averaging is sufficient to achieve lower volatility and acceptable tracking of trend inflation. We conclude that the NSA-median is a useful signal of trend inflation and a promising candidate for further study.
Publisher
Federal Reserve Bank of Cleveland
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3 articles.
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