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Estimation of Core Inflation using Robust Methods for Turkey



In this paper using various trimmed mean estimators we aim to compute robust measures of core inflation for Turkey. For this purpose we use monthly 75 cross-sectional components of HICP (Harmonized Indices of Consumer Prices) at three digits covering the period 1996:01-2007:05. Although we find that all exclusion based measures are unbiased predictor of the headline inflation, robust measures generally perform better in some important aspects. Among the robust indicators, Jarque-Bera trimmed means most accurately tracks underlying trend of inflation and is the most powerful predictor. MAD trimmed means introduced in this study and asymmetric trimmed means have also better ability to track trend of inflation than the exclusion based indicators. In this respect the robust measures can be considered by the policymakers as important intermediate targets in the framework of maintaining price stability.


Inflation, Core inflation, Distribution, Robust estimators, Trimmed mean, Turkey.

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