Tests for Price Indices in a Dynamic Item Universe

Zhang Li-Chun (), Johansen Ingvild () and Nygaard Ragnhild ()
Additional contact information
Zhang Li-Chun: University of Southampton, Highfield, Southampton, SO17 1BJ, United Kingdom.
Johansen Ingvild: Statistics Norway, P.O. Box 2633 St. Hanshaugen NO-0131Oslo, Norway.
Nygaard Ragnhild: Statistics Norway, P.O. Box 2633 St. Hanshaugen NO-0131Oslo, Norway.

Journal of Official Statistics, 2019, vol. 35, issue 3, 683-697

Abstract: There is generally a need to deal with quality change and new goods in the consumer price index due to the underlying dynamic item universe. Traditionally axiomatic tests are defined for a fixed universe. We propose five tests explicitly formulated for a dynamic item universe, and motivate them both from the perspectives of a cost-of-goods index and a cost-of-living index. None of the indices that are currently available for making use of scanner data satisfies all the tests at the same time. The set of tests provides a rigorous diagnostic for whether an index is completely appropriate in a dynamic item universe, as well as pointing towards the directions of possible remedies. We thus outline a large index family that potentially can satisfy all the tests.

Keywords: Axiomatic test; cost of goods; cost of living; quality change; new goods (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:vrs:offsta:v:35:y:2019:i:3:p:683-697:n:8

DOI: 10.2478/jos-2019-0028

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