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SWEDISH CORE INFLATION MEASURES

SWEDISH CORE INFLATION MEASURES. Peter Nilsson and Martin Ribe (presenter) Statistics Sweden Presentation at Joint UNECE/ILO Conference on Consumer Price Indices Geneva, May 2006. Swedish core inflation (underlying inflation). Alternative measures of inflation for use in monetary policy

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SWEDISH CORE INFLATION MEASURES

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  1. SWEDISH CORE INFLATIONMEASURES Peter Nilsson and Martin Ribe (presenter)Statistics Sweden Presentation at Joint UNECE/ILO Conferenceon Consumer Price IndicesGeneva, May 2006

  2. Swedish core inflation (underlying inflation) • Alternative measures of inflation for use in monetary policy • General idea: To capture price change except changes of temporary/transitional or exogenous kind • ’UND’ measures of core inflation – defined by Sveriges Riksbank and produced monthly by Statistics Sweden M. Ribe, SCB, 2006-05-03

  3. Two core inflation measures • UND1X – shows price change except changes in:▪ Owner occupiers’ interest cost▪ Indirect taxes & subsidies • UNDINHX – shows price change except changes in: ▪ Owner occupiers’ interest cost▪ Indirect taxes & subsidies▪ Prices of mainly imported products M. Ribe, SCB, 2006-05-03

  4. Principles of the measures • Rates of price change like for CPIÄ The index construction for the CPI is followed – new index construction used from 2005 • Same taxes & subsidies are adjusted for as in the Net Price Index (NPI) • Mainly retail stage changes adjusted for • Changes in taxes and subsidies are assumed to have immediate and full impact on consumer prices M. Ribe, SCB, 2006-05-03

  5. CPI approximates a COLI • Cost-Of-Living Index (coli)ÄTo follow the cost of living at a constant standard of living • Approximation to a coli by a fixed basket index that avoids Laspeyres bias • Solution in Swedish CPI before 2005:Retrospectively updated index basket • Solution in Swedish CPI from 2005:Superlative index (Walsh index) M. Ribe, SCB, 2006-05-03

  6. Chaining together of Previous and New CPI chains Link ofNew type Link of Previous type Speciallink Final link M. Ribe, SCB, 2006-05-03

  7. Walsh link over full year Expenditures M. Ribe, SCB, 2006-05-03

  8. Final Laspeyres link During 2006 weighing with expenditures of 2004 M. Ribe, SCB, 2005-06-15

  9. Sub-indices by product group • Trans-formsDecemberbase to year base M. Ribe, SCB, 2005-06-15

  10. Index of a tax j Tax rate astax per unit VATrate • Used for Net Price Index (NPI) and’UND’ measures M. Ribe, SCB, 2006-05-03

  11. Inflation rate M. Ribe, SCB, 2006-05-03

  12. Year-to-year link of UND1X Taxes &Subsidies Change in index of tax/subsidy k M. Ribe, SCB, 2006-05-03

  13. Walsh weight of a tax k Tax revenues M. Ribe, SCB, 2006-05-03

  14. Year-to-month link of UND1X M. Ribe, SCB, 2006-05-03

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