Implications of rounding and rebasing for empirical analysis using consumer price inflation

Barak Hoffman and Sharon Kozicki

No 99-08, Research Working Paper from Federal Reserve Bank of Kansas City

Abstract: Monthly CPI inflation rates can be spuriously choppy when constructed using the official CPI, rebased with 1982-84=100. The problem can be traced to rounding that occurs when only one digit after the decimal place is reported in rebased CPI data. This paper compares three CPI measures to illustrate how rounding and rebasing introduce distortions that affect variance properties, alter lag specification in autoregressive models, and \"flip\" results of unit root tests. To reduce distortions, the paper recommends using either original release data or the CPI rebased with 1967=100.

Keywords: Inflation (Finance); Consumer price indexes (search for similar items in EconPapers)
Date: 1999
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.kansascityfed.org/documents/5269/pdf-rwp99-08.pdf (application/pdf)

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: https://EconPapers.repec.org/RePEc:fip:fedkrw:99-08

Ordering information: This working paper can be ordered from
research.library@kc.frb.org

Access Statistics for this paper

More papers in Research Working Paper from Federal Reserve Bank of Kansas City Contact information at EDIRC.
Bibliographic data for series maintained by Zach Kastens (zachary.kastens@kc.frb.org).