erc/metu
INTERNATIONAL CONFERENCE IN ECONOMICS  IV
September 13-16, 2000, Ankara

Distribution of Price Indexes in Turkey and a Proposed Core Inflation Measure

Cengiz Cihan (SPO)

Abstract

Limited influence estimator approach has been proposed as a mean to derive a core inflation series by Bryan and Cecchetti(1993) and Roger(1995). As seen in these studies, the price changes of cross sectional distribution of consumer prices show high kurtosis. High kurtosis makes the sample mean less robust and less efficient estimator of population mean price change than the order statistics such as median.

This method less influenced by exceptional price movements than the sample mean. Additionally, if the exceptional price changes are associated with supply disturbances, then the median will be a simple, robust measure of core inflation. The advantage of this method can be in terms of transparency and verifiability.

The Consumer Price Index (1994=100) are used in this study between January-1994 and June-2000. The skewness and kurtosis of price changes will be observed to show right skewness and high kurtosis. In order to prevent the biasedness, there should be higher percentile than the 50th percentile of the price change distribution that corrects the asymmetry of the distribution. This percentile will also show more efficiecy and robustness than the sample mean.

Economic Research Center
Middle East Technical University
06531 Ankara Turkey
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e-mail: metuerc@metu.edu.tr