RDP 2005-05: Underlying Inflation: Concepts, Measurement and Performance
Equation
ln
L
=
−
1
2
∑
i
=
1
N
∑
t
=
1
T
ln
(
σ
t
2
w
i
t
)
−
1
2
∑
i
=
1
N
∑
t
=
1
T
w
i
t
σ
i
2
(
π
i
t
−
π
t
∗
)
2
.
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