Biasing Factors of the Consumer Price Index

Ilona Kovacs ()
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Ilona Kovacs: Institute of Economics; Hungarian Academy of Sciences

No 312, CERS-IE WORKING PAPERS from Institute of Economics, Centre for Economic and Regional Studies

Abstract: Studies conducted in the United States came to the conclusion that the annual average inflationary rate of 3 percent measured during the interval beginning in the early 1990’s through the mid-1990’s overestimates by 1.1 percentage points the changes in the cost of living. As a result, throughout the world, not just in the United States, many countries are reconsidering the supposed bias of the Consumer Price Index, its consequences, and consequences related to economic decision making. The purpose of this study is to analyze in detail the biasing factors theoretically occurring during the calculation of the Consumer Price Index, based on international literature, and the possible outcome of such biases. Out of biasing factors substitution effect empirically is investigated on Hungarian data.

JEL-codes: B21 C13 C43 E3 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2003-09
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Persistent link: https://EconPapers.repec.org/RePEc:has:discpr:0312

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