Measurement Biases in Consumer Price Indexes

White, Alan G.

doi:10.1111/j.1751-5823.1999.tb00451.x

Cited by 21 publications

(27 citation statements)

References 37 publications

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“…In practice, the CPI basket consists of hundreds or thousands of items (depending on the country) and the choice of the elementary formula may have serious consequences for the final CPI calculations. In the literature, the above-mentioned source of the CPI bias is called the elementary formula bias (White 1999). Our other simulations (which are not presented here) also confirm results obtained in Equations (15), (16), (18), and (22).…”

Section: Discussionsupporting

confidence: 87%

Basic Statistics of Jevons and Carli Indices under the GBM Price Model

Białek

2020

Journal of Official Statistics

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Most countries use either the Jevons or Carli index for the calculation of their Consumer Price Index (CPI) at the lowest (elementary) level of aggregation. The choice of the elementary formula for inflation measurement does matter and the effect of the change of the index formula was estimated by the Bureau of Labor Statistics (2001). It has been shown in the literature that the difference between the Carli index and the Jevons index is bounded from below by the variance of the price relatives. In this article, we extend this result, comparing expected values and variances of these sample indices under the assumption that prices are described by a geometric Brownian motion (GBM). We provide formulas for their biases, variances and mean-squared errors.

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Section: Discussionsupporting

confidence: 87%

Basic Statistics of Jevons and Carli Indices under the GBM Price Model

Białek

2020

Journal of Official Statistics

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“…Thus, in countries where the CPI index is determined on the basis of the Laspeyres index, there is a high probability of its bias, among others, due to substitution of goods, but not only. Most often the Laspseyres index overestimates the real inflation level (von der Lippe 2007), due to the fact that in the case of a negative price-quantity correlation (the most frequently observed situation in the basket of CPI goods and services), the value of this index is higher than the Fisher index value, treated as a very good approximation of COLI (White 1999;Pollak 1998). Most researchers dealing with the inflation measurement issue mention five potential sources of CPI index bias (White 1999;Consumer Price Index Manual.…”

Section: Sources and Types Of Bias In Inflation Measurement: Theoretical Approachmentioning

confidence: 99%

“…The Consumer Price Index (CPI) is one of the best known and most frequently used inflation measures in modern economics (see White 1999). The CPI is a narrowly targeted inflation indicator and focuses on a specific segment of the general price level in the economy.…”

Section: Introductionmentioning

confidence: 99%

Dynamics of price level changes in the Visegrad group: comparative study

Białek

Roszko‐Wójtowicz

2020

Qual Quant

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In Poland, as in many other countries, to measure inflation, expressed both by the CPI and HICP, the Laspeyres price index with weights from the base period is used. Thus calculated index does not take into account changes in the consumption structure which are caused by changes in prices in the analysed time interval (i.e.: a year). Therefore, in countries where the CPI is determined based on the Laspeyres index, there is a high probability of its bias due to substitution of goods, but not only. The value of the CPI or HICP should approximate the real inflation as accurately as possible, among others, because these indicators are used to index nominal values in the economy, which in turn is important in price decisions made by enterprises. Searching for an answer to the question about the possibility of effective reduction of the measurement bias in measuring inflation, the authors conducted an empirical study whose main aim was to assess diversity of the level of inflation in the Visegrad countries at different levels of aggregation, with particular emphasis on the scale of the bias in measuring inflation resulting from substitution of goods. The study concentrated on determining the size of differences arising from the change in the index formula used when estimating the level of inflation. The article consists of six parts in which sources and types of bias in inflation measurement are discussed, index formulas divided into weighted and unweighted ones are reviewed, statistics on inflation in the Visegrad countries are presented in a dynamic approach, and the results of empirical research are presented and discussed. For the purpose of the research part and the need to perform a comparative analysis, data on the HICP value from the Eurostat database from the years 2011–2018 were used. Therefore, it seems that both the choice of the calculation formula and the level of data aggregation in the analysis of inflation is significant in its estimates.

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“…Á neðra stigi er reynt að minnka staðgöngubjaga með því að nota margfeldismeðaltal af verðum í stað einfalds meðaltals. Einnig er talið að með því að skipta oft um neyslukörfu sé haegt að minnka staðgöngubjaga (White, 1999).…”

Section: Bjagar Vegna Breyttrar Neysluhegðunarunclassified

“…Einnig má nefna að gaeðabreytingar á fatnaði eru algengar. Nýjar vörur eru oft bornar saman við sambaerilegar eldri vörur og munur á verði áaetlaður sem gaeðamunur (White, 1999).…”

Section: Bjagar Vegna Breytinga á Vöruframboðiunclassified

Mat á efra stigs staðgöngubjaga í verðbólgumælingum á Íslandi

Halldórsson¹,

Ottesen²,

Stefánsdóttir³

2011

TVE

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ÁgripStaðgöngubjagi stafar af því að neysluhegðun breytist frá þeim tíma sem líður frá því að vogir neyslukörfu eru metnar og fram að notkun hennar við verðbólgumaelingu. Neyslukannanir sem liggja til grundvallar mati á vogum 2/3 hluta neyslukörfunnar eru að meðaltali 3 ¼ ára gamlar við maelingu verðbólgu. Stafar aldur þeirra að mestu leyti af söfnunar---og úrvinnslutíma gagna, en vogir neyslukörfunnar eru uppfaerðar árlega. Í þessari rannsókn er bjagi metinn fyrir þann hluta neyslukörfunnar sem byggir á neyslukönnunum. Með sögulegum gögnum berum við saman verðbólgutölur Hagstofunnar við verðbólgutölur sem fást með notkun einfaldrar útfaerslu af Marshall---Edgeworth---vísitölunni sem er að meðaltali samtímamaeld. Okkar mat á staðgöngubjaga í verðbólgumaelingum á Íslandi er 0,3% á ári (0,45% í 2/3 af neysluvísitölunni). Matið á bjaganum er haerra en fengist hefur í sambaerilegum rannsóknum erlendis. Mat á verðbólgu með árlegri uppfaerslu voga reyndist svipað og mat á verðbólgu með vogum sem uppfaerðar voru á fimm ára fresti. AbstractThe household expenditure surveys which are used to calculate the weights of the consumer basket are on average 3 ¼ years old when used for calculating the consumer price index. The expenditure surveys last for 3 years and it takes 15 months to process the data. The weights of the consumer basket in Iceland are updated yearly. Using historical data we can estimate the upper level substitution bias. We estimate upper level substitution bias in the consumer price index in Iceland as 0.3% per annum. In our data, the inflation estimates are comparable when the consumer basket is updated every fifth year as opposed to yearly. JEL flokkun: C43,E31 Lykilorð: Vísitala neysluverð, verðbólga, staðgöngubjagi, miðársvísitölur, Marshall---Edgeworth---vísitala.

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Measurement Biases in Consumer Price Indexes

Cited by 21 publications

References 37 publications

Basic Statistics of Jevons and Carli Indices under the GBM Price Model

Basic Statistics of Jevons and Carli Indices under the GBM Price Model

Dynamics of price level changes in the Visegrad group: comparative study

Mat á efra stigs staðgöngubjaga í verðbólgumælingum á Íslandi

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