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U.S. CORE INFLATION: A WAVELET ANALYSIS

  • Kevin Dowd (a1), John Cotter (a2) and Lixia Loh (a3)
Abstract

This paper proposes the use of wavelet methods to estimate U.S. core inflation. It explains wavelet methods and suggests that they are ideally suited to this task. Comparisons are made with traditional Consumer Price Index–based and regression-based measures for their performance in following trend inflation and predicting future inflation. Results suggest that wavelet-based measures perform better, and sometimes much better, than the traditional approaches. These results suggest that wavelet methods are a promising avenue for future research on core inflation.

Copyright
Corresponding author
Address correspondence to: Kevin Dowd, Pensions Institute, Cass Business School, 106 Bunhill Row, London EC1Y 8TZ, United Kingdom; e-mail: Kevin.Dowd@hotmail.co.uk.
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Macroeconomic Dynamics
  • ISSN: 1365-1005
  • EISSN: 1469-8056
  • URL: /core/journals/macroeconomic-dynamics
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