U.S. Core Inflation: A Wavelet Analysis

49 Pages Posted: 22 Jun 2007

See all articles by John Cotter

John Cotter

University College Dublin; UCLA Anderson School of Management

Kevin Dowd

Nottingham University Business School (NUBS)

Date Written: 2006

Abstract

This paper proposes the use of wavelet methods to estimate U.S. core inflation. It explains wavelet methods and suggests they are ideally suited to this task. Comparisons are made with traditional CPI-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.

Keywords: core inflation, wavelets, trend inflation, inflation prediction

Suggested Citation

Cotter, John and Dowd, Kevin, U.S. Core Inflation: A Wavelet Analysis (2006). Available at SSRN: https://ssrn.com/abstract=993936 or http://dx.doi.org/10.2139/ssrn.993936

John Cotter

University College Dublin ( email )

School of Business, Carysfort Avenue
Blackrock, Co. Dublin
Ireland
353 1 716 8900 (Phone)
353 1 283 5482 (Fax)

HOME PAGE: http://www.ucd.ie/bankingfinance/staff/professorjohncotter/

UCLA Anderson School of Management ( email )

110 Westwood Plaza
Los Angeles, CA 90095-1481
United States

Kevin Dowd (Contact Author)

Nottingham University Business School (NUBS) ( email )

Jubilee Campus
Wollaton Road
Nottingham, NG8 1BB
United Kingdom

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