The Laspeyres bias in the Spanish consumer price index
AbstractThe CPI compares the cost of acquiring a reference quantity vector at current and base prices. Such reference vector is the vector of mean quantities actually bought by a reference population, whose consumption patterns are investigated during a period τ prior to the index base period 0. This paper shows that unless the price change between these two dates is taken into account, the CPI ceases to be a proper statistical price index of the Laspeyres type. Among several negative consequences, the most important is that this omission produces a bias in the measurement of inflation: the 'Laspeyres bias'. Using Spanish data, the size of the Laspeyres bias is estimated at -0.061% per year, during 1992-1998. The Laspeyres bias in shorter time periods reached -0.122% per year in 1992, and -0.108 in 1997.
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Bibliographic InfoArticle provided by Taylor & Francis Journals in its journal Applied Economics.
Volume (Year): 34 (2002)
Issue (Month): 18 ()
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Other versions of this item:
- Javier Ruiz-Castillo & Eduardo Ley & Mario Izquierdo, . "The Laspeyres bias in the Spanish consumer price index," Studies on the Spanish Economy 72, FEDEA.
- Ruiz-Castillo, Javier & Ley, Eduardo & Izquierdo, Mario, 2002. "The Laspeyres bias in the Spanish consumer price index," Open Access publications from Universidad Carlos III de Madrid info:hdl:10016/4752, Universidad Carlos III de Madrid.
- C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
- D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
- D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
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- Okidi, John A. & Nsubuga, Vincent, 2010. "Inflation differentials among Ugandan household: 1997 - 2007," Research Reports 102497, Economic Policy Research Centre (EPRC).
- Okidi, John A. & Nsubuga, Vincent, 2010. "Inflation Differentials Among Ugandan Households: 1997 - 2007," Research Series 150482, Economic Policy Research Centre (EPRC).
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