Evaluating Imperfections and Biases in Price Indexes During Transition

Hanousek, Jan; Filer, Randall K.

doi:10.2139/ssrn.1514465

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Evaluating Imperfections and Biases in Price Indexes During Transition

CERGE-EI Working Paper Series No. 186

21 Pages Posted: 27 Nov 2009

See all articles by Jan Hanousek

Jan Hanousek

Faculty of Business and Economics, Mendel University in Brno; Centre for Economic Policy Research (CEPR)

City University of New York, CUNY Hunter College - Department of Economics; Charles University in Prague - CERGE-EI, a joint workplace of Charles University and the Economics Institute of the Czech Academy of Sciences; University of Michigan at Ann Arbor - The William Davidson Institute; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: September 1, 2001

Abstract

The rapidly changing environment of the transition may create special problems for calculation of index numbers that require a fixed basket of goods and outlets. Using referent-level data we find that using a fixed-weight Laspeyres Index may overstate inflation rates by approximately 5 percent a year when compared with a superlative index in the Czech Republic. We find no evidence of such problems using more aggregate data for Bulgaria and Hungary. This suggests that the extent of the problems discovered might have been even greater if we had been able to use item/store level data.

Keywords: CPI Bias, Formula bias, Price Liberalization, Substitution bias, Transition Economies

JEL Classification: C82, E31, P24

Suggested Citation: Suggested Citation

Hanousek, Jan and Filer, Randall K., Evaluating Imperfections and Biases in Price Indexes During Transition (September 1, 2001). CERGE-EI Working Paper Series No. 186, Available at SSRN: https://ssrn.com/abstract=1514465 or http://dx.doi.org/10.2139/ssrn.1514465