Why Elementary Price Index Number Formulas Differ: Price Dispersion and Product Heterogeneity
Electronic Access:
Free Download. Use the free Adobe Acrobat Reader to view this PDF file
Summary:
The Consumer Price Index Manual (2004) provides guidelines for aggregation formulas that are promulgated at IMF training courses and technical assistance missions. This paper develops elementary level aggregation theory to better inform users and compilers. Most countries use either the Dutot or Jevons index formula. These formulas generally give different results; advice on choice of formula matters. Using an approach based on sample estimators, and an illustration based on scanner data, the paper shows how differences in these formulas can be explained by changes in price dispersion and, in turn, by product heterogeneity. Implications for choice of formula are considered.
Series:
Working Paper No. 2006/174
Subject:
Consumer price indexes Expenditure Labor Population and demographics Price indexes
English
Publication Date:
July 1, 2006
ISBN/ISSN:
9781451864342/1018-5941
Stock No:
WPIEA2006174
Pages:
18
Please address any questions about this title to publications@imf.org