Bank of Canada
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Bank of Canada Review
Summer 2006
Index of Working Papers | Index of Technical Reports| Title | Evaluating Measures of Core Inflation |
| Author(s) | Thérèse Laflèche and Jamie Armour |
| Type | Bank of Canada Review article |
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Date of publication |
Summer 2006 |
| Language | English |
| Abstract | Since the Bank of Canada adopted inflation targeting in 1991, it has focused on a measure of core inflation as a shorter-term guide for monetary policy. When the targets were renewed in 2001, the Bank adopted CPIX as its measure of core inflation because of the advantages it offered. Leflèche and Armour review the experience with CPIX and whether the criteria used to select it in 2001 still favour the measure today. They describe the various measures of core inflation monitored by the Bank and evaluate them on the basis of the volatility of the components, the volatility of the core measures themselves, absence of bias relative to total CPI, predictive power, and certain practical criteria, including timeliness and credibility. They conclude that CPIX still satisfies all the empirical and practical criteria. |
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Bank topic index |
Inflation and prices, Inflation targets, Monetary policy framework |
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JEL classification |
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