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Durable goods; price indexes and quality change: an application to automobile prices in Italy, 1988-1998

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  • Gian Maria Tomat

    () (Banca d'Italia)

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    Abstract

    The paper analyzes the problems of measurement of durable consumer prices posed by quality change. Theoretical price indexes are defined and used to analyze several empirical methods of estimation of quality adjusted price indexes. The paper shows that hedonic regressions and other quality adjustment methods commonly used by statistical agencies do not always provide reliable price estimators. The analysis suggests that the application of methods of measurement based on chain indexes may remove the measurement problems associated with quality change. The paper includes an application of the theory to the analysis of automobile prices in Italy during the period 1988-1998. JEL Classification: C43; C51; D91.

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    File URL: http://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp118.pdf
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    Bibliographic Info

    Paper provided by European Central Bank in its series Working Paper Series with number 118.

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    Length: 51 pages
    Date of creation: Jan 2002
    Date of revision:
    Handle: RePEc:ecb:ecbwps:20020118

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    Related research

    Keywords: Durable goods; quality change; hedonic regressions; elementary index numbers.;

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    References

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    1. Johannes Hoffmann & Claudia Kurz, 2002. "Rent indices for housing in West Germany 1985 to 1998," Working Paper Series 116, European Central Bank.
    2. Silvia Fabiani & Ricardo Mestre, 2004. "A system approach for measuring the euro area NAIRU," Empirical Economics, Springer, vol. 29(2), pages 311-341, 05.
    3. Elena Angelini & Jérôme Henry & Ricardo Mestre, 2001. "Diffusion index-based inflation forecasts for the euro area," BIS Papers chapters, in: Bank for International Settlements (ed.), Empirical studies of structural changes and inflation, volume 3, pages 109-138 Bank for International Settlements.
    4. P. Hartmann & S. Straetmans & C. G. de Vries, 2004. "Asset Market Linkages in Crisis Periods," The Review of Economics and Statistics, MIT Press, vol. 86(1), pages 313-326, February.
    5. Fiorella de Fiore, 2000. "The optimal inflation tax when taxes are costly to collect," Working Paper Series 38, European Central Bank.
    6. Eugenio Gaiotti & Andrea Generale, 2001. "Does monetary policy have asymmetric effects? A look at the investment decisions of Italian firms," Temi di discussione (Economic working papers) 429, Bank of Italy, Economic Research and International Relations Area.
    7. Maximo Camacho & Gabriel Perez-Quiros, 2000. "This is what the US leading indicators lead," Working Paper Series 27, European Central Bank.
    8. Fiorella de Fiore, 2000. "Can indeterminacy explain the short-run non-neutrality of money?," Working Paper Series 32, European Central Bank.
    9. Brent R. Moulton & Karin E. Moses, 1997. "Addressing the Quality Change Issue in the Consumer Price Index," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 28(1), pages 305-366.
    10. Andrew Levin & John C. Williams, 2000. "The Performance of Forecast-Based Monetary Policy Rules under Model Uncertainty," Econometric Society World Congress 2000 Contributed Papers 1781, Econometric Society.
    11. Quiro, G.P. & Mendizabal, H.R., 2001. "The Daily Market for Funds in Europe: Has Something Changed with the EMU," Papers 67, Quebec a Montreal - Recherche en gestion.
    12. Francesco P. Mongelli & Oliver De Bandt, 2000. "Convergence of fiscal policies in the Euro area," Working Paper Series 20, European Central Bank.
    13. Ulf von Kalckreuth, 2001. "Monetary transmission in Germany: new perspectives on financial constraints and investment spending," Working Paper Series 109, European Central Bank.
    14. Jean-Bernard Chatelain, 2001. "Investment, the cost of capital, and monetary policy in the nineties in France: a panel data investigation," Working Paper Series 106, European Central Bank.
    15. Michael Ehrmann & Andreas Worms, 2001. "Interbank lending and monetary policy transmission - evidence for Germany," Working Paper Series 073, European Central Bank.
    16. Michael Ehrmann, 2004. "Firm Size and Monetary Policy Transmission – Evidence from German Business Survey Data," CESifo Working Paper Series 1201, CESifo Group Munich.
    17. Elena Angelini & Jérôme Henry & Ricardo Mestre, 2001. "A multi-country trend indicator for euro area inflation: computation and properties," BIS Papers chapters, in: Bank for International Settlements (ed.), Empirical studies of structural changes and inflation, volume 3, pages 81-108 Bank for International Settlements.
    18. Reint Gropp & Kristina Kostial, 2000. "The disappearing tax base: is foreign direct investment eroding corporate income taxes?," Working Paper Series 31, European Central Bank.
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    Citations

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    Cited by:
    1. Nauro F. Campos & Renata Leite Barbosa, 2009. "Paintings and numbers: an econometric investigation of sales rates, prices, and returns in Latin American art auctions," Oxford Economic Papers, Oxford University Press, vol. 61(1), pages 28-51, January.
    2. Varela-Irimia, Xosé-Luís, 2011. "Age effects, unobserved characteristics and hedonic price indexes: The Spanish car market in the 1990's," Working Papers 2072/169683, Universitat Rovira i Virgili, Department of Economics.

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