Evaluating underlying inflation measures for Russia

We apply several tests to the underlying inflation measures used in practice by central banks and/or proposed in the academic literature in an attempt to find the best-performing indicators. We find that although there is no single best measure of underlying inflation, indicators calculated on the basis of dynamic factor models are generally among the best performers. These best performers not only outdid the simpler traditional underlying indicators (trimmed and exclusion-based measures) but also proved to be economically meaningful and interpretable.