The Path-Dependence Bias in Approximating Local Price Levels by CPIs

Konstantin Gluschenko

Journal of Economics Library, 2016, vol. 3, issue 1, 69-76

Abstract: Lacking data on price levels across locations, economists are forced to proxy them. One method is to extrapolate the price levels known for locations in some point in time to another point by multiplying the initial price levels by the local CPIs. With the use of simulation experiments, this paper demonstrates that such a method is inadequate, since the path dependence of CPI alone produces considerable biases distorting cross-location comparisons of price levels.

Keywords: Spatial price index, Inflation; Divisia index, Nonhomothetic preferences, Demand system. (search for similar items in EconPapers)
JEL-codes: C15 C43 E31 R19 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.kspjournals.org/index.php/JEL/article/download/667/744 (application/pdf)
http://www.kspjournals.org/index.php/JEL/article/view/667 (text/html)

Related works:
Working Paper: The Path-Dependence Bias in Approximating Local Price Levels by CPIs (2016)
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:ksp:journ5:v:3:y:2016:i:1:p:69-76

Access Statistics for this article

Journal of Economics Library is currently edited by Bilal KARGI

More articles in Journal of Economics Library from KSP Journals Istanbul, Turkey.
Bibliographic data for series maintained by Bilal KARGI ( this e-mail address is bad, please contact ).