Abstract: Core inflation is very important for analyzing the underlying trend of inflation. Based on international practices and data from the National Bureau of Statistics, we constructed a few core inflation measures using the exclusion-based method, the trend estimation method, and the direct filter method. We then compare the qualities of these measures by looking at their correlation with monetary growth, ability to track inflation trend, and capacity in forecasting future inflation. Based on these comparisons and consideration of technical feasibility, we believe that it is most practical to use the exclusion-based method to construct China’s core CPI inflation index.

Full report :Measuring China's Core Inflation.pdf