Different statistical core inflation measures for India: construction and evaluation

Abstract

This paper computes several statistical measures for core inflation for India and provides methodology of construction of these core measures. Some of these have been computed for the first time for India, such as: persistence weighted, variations of 'Neo-Edgeworthian Index', asymmetric trimmed mean, and month-by-month exclusion (dynamic trimmed mean) core measures. For computing these core measures, the study uses both aggregate WPI and a detailed breakdown of the WPI. It covers the period April 1994-April 2009, with 1993-1994 as the base year. Subsequently, a comparison of these estimated core measures based on the criteria of usefulness of a measure of core inflation from a monetary policy point of view is carried out. The study finds only some representative measures of core inflation to be useful. © 2013 Copyright Taylor and Francis Group, LLC.