Alternative Core Inflation Measures in Nigeria: An Examination

Ladi R. Bala-Keffi, Donald G. Mbaka, Nuruddeen Usman

Abstract


Core inflation measures have played an important role in the conduct of monetary policy at various central banks around the world. We examine core inflation in Nigeria using non-traditional measures and assess their persistence, to determine whether the Central Bank of Nigeria (CBN) should pay attention to one or other of these measures when assessing inflation developments. We find that the two new measures outperform the official core rate in tracking the persistence of headline inflation. The findings of this study will aid policy making within the Central bank of Nigeria (CBN) particularly where inflation targeting is adopted as the monetary policy framework. These core inflation measures provide a useful guide to central bankers both for monetary policy decisions and as a communication tool. They are a better predictor of future inflation depicting the more persistent influences on underlying inflation, which are of interest to policymakers (e.g. Clark, 2001; Blinder and Reis, 2005; Smith, 2004 and Dolmas &Wynne, 2008).


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DOI: https://doi.org/10.11114/aef.v7i4.4911

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Applied Economics and Finance    ISSN 2332-7294 (Print)   ISSN 2332-7308 (Online)

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