South Korea Core CPI (ex Agriculture & Oil)

KRCPIQB is the raw monthly core consumer price index for Korea excluding agricultural products and petroleum, recorded verbatim with no transformation, deflation, or re-basing. The series measures the price of a fixed basket of representative consumer goods and services after the volatile agricultural and petroleum items are excluded, an index-number quantity that belongs to the base-weighted tradition of Laspeyres (1871) and its comparison-weighted counterpart Paasche (1874).

Conceptually the index approximates the true cost-of-living target of Konüs (1939), the expenditure ratio that holds a representative household's utility fixed. This approximation is made operational through the test-axiomatic and superlative-index frameworks (Fisher 1922; Diewert 1976).

The exclusion of agriculture and oil places the series in the lineage of core-inflation measurement, where the transitory supply-shock component is stripped from headline inflation (Eckstein 1981; Bryan and Cecchetti 1994). This underlying component is defined as the part of measured inflation with no long-run real effect (Quah and Vahey 1995), and measured CPI is understood as trend plus transitory noise plus bias (Cecchetti 1997).

The conceptual foundations and cost-of-living interpretation are supplied by Diewert (1998) and Diewert (2002), the axiomatic consistency it satisfies by Balk (1995), and the trend-gap reading of the resulting inflation series by Stock and Watson (2007). A rise in the index level is a rise in the nominal price of the supply-shock-cleaned representative basket, indicating the strength of underlying price pressure.

KRED applies no transformation to KRCPIQB and stores the recorded monthly index level exactly as it stands, applying none of rescaling, deflating, smoothing, or annualizing and performing no separate seasonal adjustment. The methodology is therefore confined to the measurement basis on which the index is produced.

The index is a fixed-basket aggregation of item-level price relatives, computed in the base-period-weighted form of Laspeyres (1871) rather than the comparison-weighted form of Paasche (1874), with item weights drawn from household expenditure shares. The ideal index formed as the geometric mean of the two must satisfy the test criteria of Fisher (1922), the superlative indices exact for flexible aggregators are characterized by Diewert (1976), and the log-change expenditure-share form used for chaining is given by Törnqvist (1936).

The economic target of the aggregation is the cost-of-living index of Konüs (1939), and the substitution gap from a fixed-base Laspeyres measure is quantified by Diewert (1998) and Boskin et al. (1996), the latter cataloguing commodity-substitution, outlet, quality-change, and new-goods bias. The axiomatic consistency the aggregation respects is set out by Balk (1995), and the four conceptual approaches that justify it by Diewert (2002).

The exclusion of agricultural products and petroleum follows the limited-influence and exclusion logic of Bryan and Cecchetti (1994), and the resulting series is treated as the trend-plus-noise object of Cecchetti (1997).

As an exclusion-based core measure, KRCPIQB isolates the persistent component of consumer-price inflation that monetary policy can influence. This is the role assigned to core inflation as the rate on the economy's long-run growth path when supply shocks are absent and demand is neutral (Eckstein 1981).

Removing the most volatile items sharpens the signal because the cross-sectional distribution of price changes is heavy-tailed (Bryan and Cecchetti 1994; Bryan, Cecchetti, and Wiggins 1997). The resulting gauge is thereby defined as short-run inflation purged of transitory noise for policy use (Cecchetti 1997).

The same underlying inflation is defined as the component with no long-run impact on output (Quah and Vahey 1995), and is read as the slow-moving permanent trend in an unobserved-components decomposition (Stock and Watson 2007).

Because the series is a cost-of-living proxy in the sense of Konüs (1939), its path measures the erosion of household purchasing power. That erosion is overstated by fixed-base substitution and quality bias (Diewert 1998; Boskin et al. 1996).

How faithfully that welfare change is captured depends on the basket construction and aggregation form of the index. The fixed basket follows the tradition of Laspeyres (1871) and Paasche (1874), and its superlative refinement rests on Fisher (1922) and Diewert (1976).

KRCPIQB serves as the underlying-inflation benchmark for reading real interest rates, inflation-linked cash flows, and policy-rate expectations, because it is the persistent inflation component that policymakers ultimately target (Cecchetti 1997; Eckstein 1981).

Investors converting nominal returns to real terms rely on the cost-of-living interpretation of Konüs (1939) and the index-number arithmetic of Laspeyres (1871), Paasche (1874), and Fisher (1922). Substitution and quality biases set the limit on how precisely a fixed-base CPI tracks realized purchasing power, a limit catalogued by Diewert (1998) and Boskin et al. (1996).

Trimmed-mean and exclusion core measures filter the heavy tails that distort month-to-month readings, so they are preferred to the headline figure in pricing duration and breakeven inflation (Bryan and Cecchetti 1994; Bryan, Cecchetti, and Wiggins 1997). The long-run-neutral definition that anchors term-premium and real-rate decompositions is supplied by Quah and Vahey (1995).

The trend-cycle filter through which markets extract the signal is provided by Stock and Watson (2007), and the superlative and axiomatic criteria that discipline any reweighting by Diewert (1976) and Balk (1995).

KRCPIQB is published as a not-seasonally-adjusted official core consumer-price index level, and the appropriate statistical object is its logarithm, expected to be integrated of order one. The sample is 437 monthly observations spanning 1990-01 to 2026-05, and the unit-root triplet is fitted on the log level with a constant and trend.

The augmented Dickey-Fuller regression of Dickey and Fuller (1979), in the lag-augmented form of Said and Dickey (1984), rejects the unit root at the five percent level with p = 0.043, and the nonparametric test of Phillips and Perron (1988) rejects more decisively at p = 0.000, yet the stationarity-null test rejects trend stationarity at p < 0.01 (Kwiatkowski et al. 1992). The three procedures therefore disagree, with the two difference-null tests pointing toward stationarity and the KPSS test toward a unit root, so no clean order of integration is assigned.

Because the log level does not receive a clean stationary verdict, the portmanteau and the break search are run on its first difference, since a level portmanteau on a persistent index reads mechanical near-unit autocorrelation and a level mean-break search spuriously segments a stochastic trend (Perron 1989; Hamilton 2018). The portmanteau statistic of Ljung and Box (1978), refining the form of Box and Pierce (1970), rejects the white-noise null on the differenced log level at p = 0.000, and the multiple-break procedure of Bai and Perron (1998), computed by the dynamic-programming algorithm of Bai and Perron (2003), locates a single break in the mean of the differenced series at 1998-04.

Seasonal tests are appropriate on this unadjusted monthly index. The seasonal-unit-root test of Hylleberg et al. (1990), with the monthly mechanics of Beaulieu and Miron (1993), rejects unit roots at the seasonal frequencies at p = 0.000, while the seasonal dummies are jointly significant at p = 0.000, so the seasonality is present and deterministic rather than stochastic, consistent with the stationary-seasonality reading of Canova and Hansen (1995) and with the not-seasonally-adjusted character of the series (Ghysels and Osborn 2001).