Measuring Russia’s Core Inflation: A Common Trends Approach

Samuel Albert Andriamiarintsaina RANDRIA

Abstract


In this study, we estimate core inflation in Russia using a common trends model over the period from January 2018 to January 2022. In this framework, core inflation is estimated from the information contained in the following variables: the Consumer Price Index (CPI), the Money Supply (M3), and the Industrial Production Index (IPI). Unlike other commonly used measures such as the structural VAR model, the core inflation obtained by the common trends method has a strong correlation with monetary growth and less volatile than headline inflation. It provides an estimate of underlying inflation based on broader information, integrating macro-economic variables which play an important role in determining the long-term inflation rate. It thus makes it possible to identify the strategies of monetary and budgetary policies making it possible to achieve the inflation target and an economic growth objective.


Keywords


Core inflation, Common trends model, Structural VAR, Monetary policy

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References


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DOI: http://dx.doi.org/10.52155/ijpsat.v48.2.6946

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