The Indices of Сore Inflation in Russia

Abstract

This paper systematically reviews the theoretical rationale for the various core inflation measures and the experience of their implementation. The widely used exclusion-based method, also adopted in Russia for the official «core» consumer price index since 2003, is applied to calculate retrospectively this index back to 1997. A number of alternative core inflation measures for Russia for the period of 1997–2010 are also provided, with the methodology of their construction explained in detail. Formal criteria characterizing the correspondence of different core inflation measures to the theoretical requirements are econometrically tested, showing that the official «core» consumer price index reflects the trend of price dynamics no worse than other measures constructed using exclusion-based and trimmed-mean methods.