U.S. Core Inflation: A Wavelet Analysis

John Cotter, Kevin Dowd
2006 Social Science Research Network  
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
more » ... ods are a promising avenue for future research on core inflation.
doi:10.2139/ssrn.993936 fatcat:qufi7szarjfq7ngusqet2afc4q