Estimating the impact of quality adjustment on consumer price inflation
Elisabeth Wieland and
No 2773, Working Paper Series from European Central Bank
How much does quality adjustment matter in measuring consumer price inﬂation? To address this question, we use diﬀerent sources of micro and macro price data for Germany and the euro area. For Germany, we ﬁnd that quality adjustment applies to a large range of goods and services but, on average, price adjustments due to quality changes reduce headline inﬂation only by 0.06 percentage points, which is balanced out by an increase due to quantity adjustment (e.g. a smaller package size) of the same amount. For the euro area, we assess the impact of heterogeneous quality adjustment methods by deriving the distribution of member states’ cumulative inﬂation rates for typical quality-adjusted products. Our macro-based estimate makes up to ± 0.2 percentage points for headline HICP inﬂation and ranges between± 0.1 and 0.3 percentage points for core inﬂation, when controlling for income diﬀerentials between member states. [...] JEL Classification: E31, C43
Keywords: inﬂation diﬀerentials; inﬂation measurement; micro price data; quality adjustment (search for similar items in EconPapers)
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Working Paper: Estimating the impact of quality adjustment on consumer price inflation (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:20232773
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