A Markup Model of Inflation for the Euro Area

38 Pages Posted: 19 May 2004

See all articles by C. Bowdler

C. Bowdler

University of Oxford

Eilev S. Jansen

Norges Bank - Research Department; Statistics Norway

Date Written: February 2004

Abstract

In the paper we propose a new methodological approach to core inflation estimation, based on a frequency domain principal components estimator, suited to estimate systems of fractionally cointegrated processes. The proposed core inflation measure is the scaled common persistent factor in inflation and excess nominal money growth and bears the interpretation of monetary inflation. The proposed measure is characterised by all the properties that an "ideal" core inflation process should show, providing also a superior forecasting performance relative to other available measures.

Keywords: Inflation, price-cost markup, cointegration, time-varying intercept, dynamic modelling

JEL Classification: C22, C32, E31

Suggested Citation

Bowdler, Christopher and Jansen, Eilev Sandvik and Jansen, Eilev Sandvik, A Markup Model of Inflation for the Euro Area (February 2004). Available at SSRN: https://ssrn.com/abstract=515068 or http://dx.doi.org/10.2139/ssrn.515068

Christopher Bowdler (Contact Author)

University of Oxford ( email )

Oxford
United Kingdom

Eilev Sandvik Jansen

Statistics Norway ( email )

Kongens Gt. 6
PO Box 8131 Dep
N-0033 Oslo
Norway
+4791387583 (Phone)
+4721090040 (Fax)

HOME PAGE: http://folk.ssb.no/eja/

Norges Bank - Research Department ( email )

P.O. Box 1179
Oslo, N-0107
Norway

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