A Note on the Efficient Estimation of Inflation in Brazil

Banco Central do Brasil Working Paper No. 11

25 Pages Posted: 23 Jun 2001

See all articles by Michael F. Bryan

Michael F. Bryan

Federal Reserve Bank of Cleveland; Federal Reserve Banks - Federal Reserve Bank of Atlanta

Stephen G. Cecchetti

Brandeis International Business School; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Date Written: September 25, 2000

Abstract

This paper investigates the use of trimmed-mean estimators and time-series averaging as techniques for improving the signal-to-noise ratio in high-frequency price data. We show that trimmed-mean estimators substantially increase the efficiency of the aggregate estimator compared to the more standard mean-measures. In this way, these estimators also reduce a central bank's need to time-series average the monthly inflation estimates which greatly improves the timeliness of the inflation statistic. In the case of Brazil, we find that asymmetrically trimming 24 percent from the tails of the price-change distribution reduces the RMSE of the monthly inflation statistic as a measure of the inflation trend by 23 percent, making it as accurate as the 3-month average growth rate of the mean retail price measure. We also demonstrate that a 3-month lagged moving average of the optimal (asymmetrically) trimmed mean is as efficient an estimator of the 24-month centered moving-average retail price growth trend as the mean inflation rate averaged over any horizon.

Keywords: Inflation, Brazil

JEL Classification: E52, E58

Suggested Citation

Bryan, Michael F. and Cecchetti, Stephen G., A Note on the Efficient Estimation of Inflation in Brazil (September 25, 2000). Banco Central do Brasil Working Paper No. 11. Available at SSRN: https://ssrn.com/abstract=272661 or http://dx.doi.org/10.2139/ssrn.272661

Michael F. Bryan (Contact Author)

Federal Reserve Bank of Cleveland ( email )

PO Box 6387
Cleveland, OH 44101
United States

Federal Reserve Banks - Federal Reserve Bank of Atlanta

1000 Peachtree Street N.E.
Atlanta, GA 30309-4470
United States

Stephen G. Cecchetti

Brandeis International Business School ( email )

415 South Street
Waltham, MA 02453
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States
212-720-8629 (Phone)
212-720-2630 (Fax)

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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