Substitution Bias in Multilateral Methods for CPI Construction using Scanner Data

Walter Diewert and Kevin Fox

No 2018-13, Discussion Papers from School of Economics, The University of New South Wales

Abstract: The use of multilateral indexes is increasingly an accepted approach for incorporating scanner data in a Consumer Price Index. The attractiveness stems from the ability to be able to control for chain drift bias. Consensus on two key issues has yet to be achieved: (i) the best multilateral method to use, and (ii) the best way of extending the resulting series when new observations become available. We present theoretical and simulation evidence on the extent of substitution biases in alternative methods. Our results suggest the use of the CCDI index with a new method, the “mean splice”, for updating.

Keywords: Consumer Price Index; chain drift; multilateral indexes; Rolling Window indexes; linking methods (search for similar items in EconPapers)
JEL-codes: C43 E31 (search for similar items in EconPapers)
Pages: 66 pages
Date: 2018-10
New Economics Papers: this item is included in nep-mac
References: View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Related works:
Working Paper: Substitution Bias in Multilateral Methods for CPI Construction using Scanner Data (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:swe:wpaper:2018-13

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