Weighted Median Inflation Across the World: A Measure of Core Inflation

The usual measure of core or underlying inflation is the inflation price excluding meals and power costs. This paper constructs another measure, the weighted median inflation price, for 38 superior and rising economies utilizing subclass stage disaggretion of the CPI over 1990-2021, and compares the properties of this measure to these of normal core. For quarterly knowledge, we discover that the weighted median is much less unstable than normal core, extra carefully associated to financial slack, and extra carefully associated to headline inflation over the subsequent yr. The weighted median additionally has a disadvantage: in most nations, it has a decrease common stage than headline inflation. We subsequently additionally take into account a measure of core inflation that eliminates this bias, which relies on the percentile of sectoral inflation charges that matches the pattern common of headline CPI inflation.