Is There a Quality Bias in the Canadian CPI? Evidence from Micro Data
AbstractRising consumer prices may reflect shifts by consumers to new higher-priced products, mostly for durable and semi-durable goods. I apply Bils’ (2009) methodology to newly available Canadian consumer price data for non-shelter goods and services to estimate how price increases can be divided between quality growth and price inflation. I find that less than one-third of observed price increases during model changeovers should be attributed to quality growth. This implies overall price inflation close to inflation measured by the official index. I conclude that, according to Bils’ methodology, the quality bias is not an important source of potential mismeasurement of CPI inflation in Canada.
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Bibliographic InfoPaper provided by Bank of Canada in its series Working Papers with number 13-24.
Length: 25 pages
Date of creation: 2013
Date of revision:
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Inflation and prices; Potential output;
Find related papers by JEL classification:
- E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
- M11 - Business Administration and Business Economics; Marketing; Accounting - - Business Administration - - - Production Management
- O47 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Measurement of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-07-28 (All new papers)
- NEP-MAC-2013-07-28 (Macroeconomics)
- NEP-MON-2013-07-28 (Monetary Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Mark Bils, 2009. "Do Higher Prices for New Goods Reflect Quality Growth or Inflation?," The Quarterly Journal of Economics, MIT Press, vol. 124(2), pages 637-675, May.
- Ruiz-Castillo, Javier & Ley, Eduardo & Izquierdo, Mario, 2002.
"Distributional aspects of the quality change bias in the CPI: evidence from Spain,"
Elsevier, vol. 76(1), pages 137-144, June.
- Javier Ruiz-Castillo & Eduardo Ley & Mario Izquierdo, . "Distributional aspects of the quality change bias in the CPI: Evidence from Spain," Studies on the Spanish Economy 73, FEDEA.
- Timothy Beatty & Erling Røed Larsen, 2005.
"Using Engel curves to estimate bias in the Canadian CPI as a cost of living index,"
Canadian Journal of Economics,
Canadian Economics Association, vol. 38(2), pages 482-499, May.
- Beatty, Timothy K.M. & Larsen, Erling Roed, 2004. "Using Engel Curves To Estimate Bias In The Canadian Cpi As A Cost Of Living Index," Working Papers 15836, University of British Columbia, Food and Resource Economics.
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