Retrospective Price Indices and Substitution Bias
Walter Diewert (),
Marco Huwiler and
Economics working papers from Vancouver School of Economics
The consumer price index (CPI) is usually computed as a fixed-weighted Laspeyres price index, with the weights updated at discrete intervals only. It is well known that the Laspeyres functional form entails a substitution bias. One way to reduce it would be to use chained indices, and superlative ones if possible. Unfortunately, the necessary data are often missing. This paper proposes a simple method to retroactively compute the CPI once updated weights become available. The proposed index has the Fisher form. This makes it possible to assess the size of the substitution bias. An application to Swiss data is provided.
Keywords: price index; inflation; superlative indices; substitution bias (search for similar items in EconPapers)
JEL-codes: C43 E31 (search for similar items in EconPapers)
Pages: 11 pages
Date: 2009-01-20, Revised 2009-01-20
New Economics Papers: this item is included in nep-cba and nep-mac
References: Add references at CitEc
Citations: View citations in EconPapers (2) Track citations by RSS feed
Downloads: (external link)
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://www.econ.ubc.ca/diewert/dp0901.pdf [301 Moved Permanently]--> http://papers.economics.ubc.ca/legacypapers/dp0901.pdf)
Journal Article: Retrospective Price Indices and Substitution Bias (2009)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:ubc:bricol:erwin_diewert-2009-4
Access Statistics for this paper
More papers in Economics working papers from Vancouver School of Economics
Bibliographic data for series maintained by Maureen Chin ().