Economics at your fingertips  

Biases in Consumer Price Index Methodology in Pakistan: Suggestions for Improvements

Zahid Asghar () and Mahmood Khalid ()

The Pakistan Development Review, 2008, vol. 47, issue 3, 267-285

Abstract: The issues relating to the complexity of the measurement of the Consumer Price Index (CPI) which is regarded as the best and most well known indicator of inflationary trends and without referring to which economic policies cannot be evaluated have long been debated. Any measurement error in CPI may over or understate inflation, which can have serious repercussions on monetary, fiscal and other economic management policies. The report of the Boskin Commission [Boskin, et al. (1996)] has identified the possible sources of bias in the CPI. These biases which this study has also corroborated through a primary survey of selected households relate to commodity and outlet substitution, quality adjustment and new product introduction as well as index calculation in the existing methodologies. In this paper these biases have been evaluated for Pakistan and ways to improve the construction of the Index have been suggested. Other issues in Pakistan relate to selecting a representative product (or good), defining average quality, data collection, weights determination and base year change. The use of the Geometric means index formula and Laspeyre’s Index to reduce the formula bias has been proposed in this study.

Keywords: Consumer Price Index; Biases in CPI; CPI Formulae (search for similar items in EconPapers)
JEL-codes: C43 E31 E52 (search for similar items in EconPapers)
Date: 2008
References: Add references at CitEc
Citations: Track citations by RSS feed

Downloads: (external link) (application/pdf)
Access to the full text is restricted. Please contact our publication Division for full article Email: Phone: +92-51-9248089

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:

Access Statistics for this article

More articles in The Pakistan Development Review from Pakistan Institute of Development Economics Contact information at EDIRC.
Bibliographic data for series maintained by Khurram Iqbal ().

Page updated 2023-06-15
Handle: RePEc:pid:journl:v:47:y:2008:i:3:p:267-285