1. FGV/IBRE Core Inflation Estimators for the Brazilian Economy Jack Schechtman Rebecca Barros Core Inflation and Price Index Harmonization Seminar held at Central Bank of Brazil Rio de Janeiro, 07-08 June 2001

2. Starting Point Jevons (1865) - Generalized Inflation

3. Main Objective To extract information from individual price changes in order to detect a generalized movement of prices

4. Relative Price Adjustment and Cross Section Distribution Cross Section Distribution –High Degree of Kurtosis (Non-normal distribution) –Arithmetic Mean looses efficiency as a central measure estimator Menu Cost Market Imperfections Asymmetric Information Expectations

5. Our Approach The traditional methodology of trimmed means (Bryan, Ceccheti, Winggins and Roger) with the following additional considerations: –Individual price changes may carry information about the generalized movement of prices –There must be a special treatment for prices that are adjusted once a year or a few times per year - e.g. administered prices, etc

6. Our Approach

7. Measure of Core Inflation

8. NEW RESEARCH ON MEASURING CORE INFLATION - INFORMATION CORE -