Discussion Papers no. 200

The role of oil price shocks and imported inflation

Estimating core inflation

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This paper calculates core inflation, by imposing long run restrictions on a structural vector autoregression (VAR) model containing the growth rate of output, inflation and oil prices. Core inflation is identified as that component in inflation that has no long run effect on output. No restrictions are placed on the response of output and inflation to the oil price shocks. The analysis is applied to Norway and the United Kingdom, both oil producing OECD countries. A model that distinguishes between domestic and imported inflation, is also specified for Norway. In both countries, core inflation is a prime mover of CPI (RPI) inflation. However, CPI (RPI) inflation overvalues or undervalues core inflation in many periods, of which oil price shocks are important sources behind this deviation for prolonged periods

Om publikasjonen

Tittel

Estimating core inflation. The role of oil price shocks and imported inflation

Ansvarlig

Hilde Christiane Bjørnland

Serie og -nummer

Discussion Papers no. 200

Utgiver

Statistics Norway, Research Department

Emne

Discussion Papers

Antall sider

34

Målform

Engelsk

Om Discussion Papers

Discussion papers comprise research papers intended for international journals and books. A preprint of a Discussion Paper may be longer and more elaborate than a standard journal article as it may include intermediate calculations, background material etc.

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