Friday, 12 June 2020 06:50

Estimating and evaluating measures of core inflation in Lesotho

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THIS PAPER estimates and evaluates the measures of core inflation in Lesotho for the sample period March 2009 to December 2017 using the CPI data. Using five exclusion-based measures and one limited influence estimator, the results reveal that the 30%-trimmed mean tracks trend inflation very well relative to other measures and using the one-month ahead forecasts only 30% trimmed mean core inflation indicator has significant predictive power for the future headline inflation. Nonetheless, as the forecasting horizon increases some measures have significant predictive content for the future headline inflation but the 30%-trimmed mean surpasses all of the calculated core inflation indicators. It is therefore adopted as the ideal measure of core inflation for Lesotho

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