Excluding Items from Personal Consumption Expenditures Inflation
A Reprint from "Staff Papers"
Description:... Core inflation measures constructed by excluding volatile items from the price index have a long history. The most common exclude the prices of food and energy items. This paper sheds light on the impact of excluding certain items from the personal consumption expend. price index. Considers the trade-off between reducing short-run volatility and possibly distorting the measurement of inflation over longer horizons. Answers these questions: Which items have the highest time series volatility? Among the items with high volatility, are there meaningful patterns in the dist. of volatility across high and low frequencies? Which items, by their exclusion, have the largest impact on longer-horizon measures of inflation? A print on demand report.
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