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Weighting bias and inflation in the time of COVID-19: evidence from Swiss transaction data

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  • Pascal Seiler

    (ETH Zurich, KOF Swiss Economic Institute)

Abstract

Sharp changes in consumer expenditure may bias inflation during the COVID-19 pandemic. Using public data from debit card transactions, I quantify these changes in consumer spending, update CPI basket weights and construct an alternative price index to measure the effect of the COVID-induced weighting bias on the Swiss consumer price index. I find that inflation was higher during the lock-down than suggested by CPI inflation. The annual inflation rate of the COVID price index was −0.4% by April 2020, compared to −1.1% of the equivalent CPI. Persistent “low-touch” consumer behavior can further lead to inflation being underestimated by more than a quarter of a percentage point until the end of 2020.

Suggested Citation

  • Pascal Seiler, 2020. "Weighting bias and inflation in the time of COVID-19: evidence from Swiss transaction data," Swiss Journal of Economics and Statistics, Springer;Swiss Society of Economics and Statistics, vol. 156(1), pages 1-11, December.
    • Handle: RePEc:spr:sjecst:v:156:y:2020:i:1:d:10.1186_s41937-020-00057-7
    DOI: 10.1186/s41937-020-00057-7
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    References listed on IDEAS

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    Cited by:

    1. Elena Druică & Călin Vâlsan & Andreea-Ionela Puiu, 2022. "Voluntary Simplicity and Green Buying Behavior: An Extended Framework," Energies, MDPI, vol. 15(5), pages 1-17, March.
    2. Huw Dixon & Aftab Chowdhury, 2023. "Energy Expenditures and CPI Inflation in 2022: Inflation Was Even Higher Than We Thought," National Institute of Economic and Social Research (NIESR) Discussion Papers 550, National Institute of Economic and Social Research.
    3. Peter A.G. van Bergeijk, 2021. "Pandemic Economics," Books, Edward Elgar Publishing, number 20401.
    4. Pascal Seiler & Barbara Rudolf, 2022. "Price Setting Before and During the Pandemic: Evidence from Swiss Consumer Prices," KOF Working papers 22-506, KOF Swiss Economic Institute, ETH Zurich.
    5. Angelini, Elena & Damjanović, Milan & Darracq Pariès, Matthieu & Zimic, Srečko, 2023. "Modelling pandemic risks for policy analysis and forecasting," Economic Modelling, Elsevier, vol. 120(C).
    6. Xavier Jaravel & Martin O'Connell, 2020. "High‐Frequency Changes in Shopping Behaviours, Promotions and the Measurement of Inflation: Evidence from the Great Lockdown," Fiscal Studies, John Wiley & Sons, vol. 41(3), pages 733-755, September.
    7. Hindriks, Jean & Madio, Leonardo & Serse, Valerio, 2021. "Promotion ban and heterogeneity in retail prices during the Great Lockdown," LIDAM Discussion Papers CORE 2021005, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    8. Xu, Yingying & Lien, Donald, 2022. "Assessing the impact of COVID-19 on price Co-movements in China," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 79(C).
    9. Kantur, Zeynep & Özcan, Gülserim, 2021. "What pandemic inflation tells: Old habits die hard," Economics Letters, Elsevier, vol. 204(C).
    10. Martin Brown & Matthias R. Fengler & Jonas Huwyler & Winfried Koeniger & Rafael Lalive & Robert Rohrkemper, 2023. "Monitoring consumption Switzerland: data, background, and use cases," Swiss Journal of Economics and Statistics, Springer;Swiss Society of Economics and Statistics, vol. 159(1), pages 1-16, December.
    11. Mr. Francesco Grigoli & Evgenia Pugacheva, 2022. "Updating Inflation Weights in the UK and Germany during COVID-19," IMF Working Papers 2022/204, International Monetary Fund.
    12. Kuldeep Singh & Sam Goundar & Preetha Chandran & Amit Kumar Agrawal & Nimisha Singh & Prasanna Kolar, 2023. "Digital Banking through the Uncertain COVID Period: A Panel Data Study," JRFM, MDPI, vol. 16(5), pages 1-18, April.
    13. Santiago E. Alvarez & Sarah M. Lein, 2020. "Tracking inflation on a daily basis," Swiss Journal of Economics and Statistics, Springer;Swiss Society of Economics and Statistics, vol. 156(1), pages 1-13, December.
    14. Webel, Karsten, 2022. "A review of some recent developments in the modelling and seasonal adjustment of infra-monthly time series," Discussion Papers 31/2022, Deutsche Bundesbank.
    15. Cruz-Cárdenas, Jorge & Zabelina, Ekaterina & Guadalupe-Lanas, Jorge & Palacio-Fierro, Andrés & Ramos-Galarza, Carlos, 2021. "COVID-19, consumer behavior, technology, and society: A literature review and bibliometric analysis," Technological Forecasting and Social Change, Elsevier, vol. 173(C).
    16. Edgar Caicedo-García & Jesús Daniel Sarmiento-Sarmiento & Ramón Hernández-Ortega, 2022. "Inflación y Covid-19: un ejercicio para Colombia," Borradores de Economia 1198, Banco de la Republica de Colombia.

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    More about this item

    Keywords

    Inflation; Consumption expenditure; Card transaction data; High-frequency data; COVID-19;
    All these keywords.

    JEL classification:

    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications

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