U.S. Core Inflation: A Wavelet Analysis

49 Pages Posted: 22 Jun 2007

See all articles by John Cotter

John Cotter

University College Dublin

Kevin Dowd

Nottingham University Business School (NUBS)

Date Written: 2006


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
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Kevin Dowd (Contact Author)

Nottingham University Business School (NUBS) ( email )

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Wollaton Road
Nottingham, NG8 1BB
United Kingdom