Calculation of the Skewed of the Consumer Price Index from the True Index of Cost of Living

Mahnaz Sorkhvandi (), Kiomars Sohaili () and Shahram Fattahi ()
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Mahnaz Sorkhvandi: Ph.D.Economics,Razi University
Kiomars Sohaili: Associate Professor, Department of Economics, Razi University
Shahram Fattahi: Associate Professor, Department of Economics, Razi University

Quarterly Journal of Applied Theories of Economics, 2023, vol. 9, issue 4, 37-60

Abstract: This thesis investigates the impact of government spending shocks on One of the weaknesses of the consumer price index is the existence of fixed weights, which means that consumers cannot replace more expensive goods with cheaper goods in response to changes in relative prices, but the correct index of the cost of living is a more complete theory of consumption demand. It includes the doer. The main purpose of this paper is to estimate the difference between the consumer price index and the actual cost of living index. For this purpose, using the data from 1971 to 2019, first the required parameters using AIDS for different product groups with the sur technique have been estimated. Using the seemingly irrelevant regression results, the correct cost-of-living index was calculated based on the base year of 2016. The results show that the consumer price index is skewed with the correct cost of living index and during the study period for the years 1989, 2002, 2005, 2017 and the consumer price index is skewed upwards and for the rest of the years is skewed upwards. It is low and the correct cost of living index and consumer price index are not equal.

Keywords: cost of living index; price index; oblique; seemingly unrelated regression. (search for similar items in EconPapers)
JEL-codes: D11 D12 (search for similar items in EconPapers)
Date: 2023
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