Issues With A Chained-Type Price Index: An Analysis With The Producer Price Index
AbstractRegarding the recent switch from the fixed base price index to the chained-type price index in many countries, we examine important issues including the selection of the weight to produce more accurate chained-type price indices and to maintain statistical consistency in the time series of a price index in this study. We determine that the actual weight from year t-3 data better produces a more correct chained-type producer price index at t between two available methods of selecting the weights. This weighting method also provides generally better statistical consistency and stability for the chained-type producer price index. We also compare the MAE and RMSE of the price equations of the fixed base and chain indices. Both the unit root test and comparison of the model performance evaluation reveal no critical difference, thus confirming a stability over the two indices. In particular, the substitutability of the chain index for the fixed base index is highly obtained, regardless of the time horizon. Overall, we can confidently assert that the chain index provides a statistical consistency and stability over a fixed base index.
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Bibliographic InfoArticle provided by Chung-Ang Unviersity, Department of Economics in its journal Journal Of Economic Development.
Volume (Year): 36 (2011)
Issue (Month): 3 (September)
Chained-type Price Index; Weight to Produce Price Index; Producer Price Index; Accuracy; Statistical Consistency and Stability;
Find related papers by JEL classification:
- C82 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Macroeconomic Data; Data Access
- E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
- E01 - Macroeconomics and Monetary Economics - - General - - - Measurement and Data on National Income and Product Accounts and Wealth; Environmental Accounts
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"Forecasting Economic and Financial Variables with Global VARs,"
CESifo Working Paper Series
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- M. Hashem Pesaran & Til Schuermann & L. Vanessa Smith, 2008. "Forecasting economic and financial variables with global VARs," Staff Reports 317, Federal Reserve Bank of New York.
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