Estimating Commodity Substitution Bias in the Irish Inflation Rate Statistics during the Financial Crisis

Colin Bermingham, Dermot Coates and Derry O'Brien
Additional contact information
Colin Bermingham: Formerly of the Central Bank of Ireland, Dublin, Ireland
Dermot Coates: Central Bank of Ireland, Dublin, Ireland
Derry O'Brien: Formerly of the Central Bank of Ireland, Dublin, Ireland

The Economic and Social Review, 2016, vol. 47, issue 3, 327-337

Abstract: Measures such as the Consumer Price Index are important economic indicators setting out price changes in the Irish economy over time. Such measures, however, are subject to various types of measurement bias. The latter can include Commodity Substitution Bias whereby the weights assigned to each item in a representative basket of goods and services cease to fully reflect consumer expenditure patterns over time, and particularly during a period of economic upheaval. This, in turn, can lead to the overstatement (or understatement) of inflation. The Central Statistics Office (CSO) now updates the relevant weights every year, thereby reducing the impact of this bias. In this article, we have endeavoured to estimate the size of the bias in the period leading up to the introduction of the new methodology in 2012. The results presented here indicate that the rate of inflation was slightly understated. The degree of this measurement bias was not significantly higher than that identified in other countries in which this phenomenon has been examined, albeit that in the latter countries an upward bias (or overstatement) was found.

Keywords: commodities; inflation; financial crisis (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.esr.ie/article/view/603/142 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eso:journl:v:47:y:2016:i:3:p:327-337

Access Statistics for this article

More articles in The Economic and Social Review from Economic and Social Studies
Bibliographic data for series maintained by Aedin Doris ().