Harmonized Indexes of Consumer Prices: Their Conceptual Foundations

Walter Diewert

Swiss Journal of Economics and Statistics (SJES), 2002, vol. 138, issue IV, 547-637

Abstract: The Harmonized Index of Consumer Prices (HICP) is the single most important indicator of inflation used by the European Central Bank. Sections 2 to 4 of the paper look at the theory of inflation indexes that could be used as target indexes of inflation. A Consumer Price Index (CPI) emerges as perhaps the most useful target index. Four different approaches to index number theory are reviewed and the "best" index number formula from each perspective is determined. Section 6 looks at the methodology of the HICP in the light of the previous sections. Section 7 looks at some of the difficult measurement problems that must be addressed in a CPI or an HICP. These problems include the treatment of quality change, substitution or representativity bias, chained versus fixed base indexes, the choice of formula at the lowest level of aggregation and the treatment of owner occupied housing and seasonal commodities.

Keywords: Inflation target; Consumer Price Index; Harmonized Index of Consumer Prices; the System of National Accounts; superlative indexes; fixed basket indexes; stochastic indexes; index number tests; cost of living indexes; tourist expenditures; elementary indexes; quality change; substitution bias; representativity bias; chained indexes; fixed base indexes; owner occupied housing; seasonal commodities; user cost; rental equivalence; acquisitions approach; unit values; intertemporal cost of living indexes; the temporary equilibrium; asset prices. (search for similar items in EconPapers)
JEL-codes: C43 C81 D11 D91 E31 E52 E58 O47 (search for similar items in EconPapers)
Date: 2002
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (39)

Downloads: (external link)
http://www.sjes.ch/papers/2002-IV-13.pdf (application/pdf)

Related works:
Working Paper: Harmonized indexes of consumer prices: their conceptual foundations (2002)
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:ses:arsjes:2002-iv-13

Access Statistics for this article

Swiss Journal of Economics and Statistics (SJES) is currently edited by Marius Brülhart

More articles in Swiss Journal of Economics and Statistics (SJES) from Swiss Society of Economics and Statistics (SSES) Contact information at EDIRC.
Bibliographic data for series maintained by Kurt Schmidheiny (mail@sgvs.ch).