Abstract
This article examines the relationship between the ‘exclusion’ type Core
Inflation (CI) measures and the stability price index. Empirical results for
Malaysia and Pakistan suggest that if targeting CI index is to stabilize
output, weights of the export-oriented sectors (energy for Malaysia and
foodstuffs for Pakistan) should be reduced, in relation to the CPI weights,
and weights of the import-oriented sectors should be increased. It also
indicates that, in order to maintain real sector stability, central bankers
should include the fundamental component of the stock market prices in the
price index they target.
Inflation (CI) measures and the stability price index. Empirical results for
Malaysia and Pakistan suggest that if targeting CI index is to stabilize
output, weights of the export-oriented sectors (energy for Malaysia and
foodstuffs for Pakistan) should be reduced, in relation to the CPI weights,
and weights of the import-oriented sectors should be increased. It also
indicates that, in order to maintain real sector stability, central bankers
should include the fundamental component of the stock market prices in the
price index they target.
| Original language | English |
|---|---|
| Pages (from-to) | 737-741 |
| Journal | Applied Economics Letters |
| Volume | 20 |
| Issue number | 8 |
| Early online date | 22 Nov 2012 |
| DOIs | |
| Publication status | Published - 2013 |
Keywords
- price index; monetary policy; output stability; financial markets