Coherent Identifier About this item: 20.500.12592/vb5sfg

A strucural VAR approach to core inflation in Canad




On these grounds, as mentioned by Roger 5. Eckstein speci ed core in ation as the trend increases of the cost of the factors of production. According to him, core in ation originates in the long-term expectations of in ation in the minds of households and businesses, in the contractual arrangements which sustain the wage-price momentum, and in the tax system. 2 (1998), only policy-makers with a [...] The goal of this paper is to expand the set of in ation measures used by the Bank of Canada. [...] The literature shows a clear divergence of opinions on the choice of the relevant shocks, and on the way to model the interaction between the same set of variables in some cases.7 The literature also demonstrates that the debate over the stationarity of the in ation rate has profound implications for the identi cation of core in ation; it explicitly a¤ects the long-run properties of the Phillips c [...] TPo constrain the core shock to be output neutral, the authors use the long-run constraint:1 a12;j = 0. j=0 The component of measured in ation that is output-neutral in the long run (i.e., core in ation) is obtained from the e¤ects of the core shock on in ation: X1 ct = 2 + a22;je2;t j; j=0 6. A 2 0 contains n elements (n = the number of dependent variables). [...] Since the core in ation rate obtained from the structural VAR has zero mean, we add the means that we previously subtracted to obtain our core measure.15 The other key issue concerns the choice of shocks to implement in the structural VAR to identify core in ation.



economics economy monetary policy economists macroeconomics money prices central bank bank of canada vector autoregression phillips curve macro economics inflation (finance) moving average


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