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

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  • Tomat, Gian Maria
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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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    Bibliographic Info

    Paper provided by European Central Bank in its series Working Paper Series with number 0118.

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    Date of creation: Jan 2002
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    Handle: RePEc:ecb:ecbwps:20020118

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    1. Ehrmann, M., 2000. "Firm Size and Monetary Policy Transmission - Evidence from German Business Survey Data," Economics Working Papers eco2000/12, European University Institute.
    2. Hoffmann, Johannes & Kurz, Claudia, 2002. "Rent indices for housing in West Germany 1985 to 1998," Working Paper Series 0116, European Central Bank.
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    6. De Bandt, Olivier & Mongelli, Francesco Paolo, 2000. "Convergence of fiscal policies in the euro area," Working Paper Series 0020, European Central Bank.
    7. Pérez Quirós, Gabriel & Rodríguez Mendizábal, Hugo, 2001. "The daily market for funds in Europe: Has something changed with the EMU?," Working Paper Series 0067, European Central Bank.
    8. Camacho, Maximo & Pérez Quirós, Gabriel, 2000. "This is what the US leading indicators lead," Working Paper Series 0027, European Central Bank.
    9. Hartmann, Philipp & Straetmans, Stefan & de Vries, Casper, 2001. "Asset market linkages in crisis periods," Working Paper Series 0071, European Central Bank.
    10. Williams, John C. & Levin, Andrew T. & Wieland, Volker, 2001. "The performance of forecast-based monetary policy rules under model uncertainty," Working Paper Series 0068, European Central Bank.
    11. von Kalckreuth, Ulf, 2002. "Monetary Transmission in Germany: New Perspectives on Financial Constraints and Investment Spending," Royal Economic Society Annual Conference 2002 179, Royal Economic Society.
    12. Angelini, Elena & Henry, Jérôme & Mestre, Ricardo, 2001. "Diffusion index-based inflation forecasts for the euro area," Working Paper Series 0061, European Central Bank.
    13. Silvia Fabiani & Ricardo Mestre, 2004. "A system approach for measuring the euro area NAIRU," Empirical Economics, Springer, vol. 29(2), pages 311-341, 05.
    14. 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.
    15. De Fiore, Fiorella, 2000. "The optimal inflation tax when taxes are costly to collect," Working Paper Series 0038, European Central Bank.
    16. Gropp, Reint & Kostial, Kristina, 2000. "The disappearing tax base: is foreign direct investment eroding corporate income taxes?," Working Paper Series 0031, European Central Bank.
    17. De Fiore, Fiorella, 2000. "Can indeterminacy explain the short-run non-neutrality of money?," Working Paper Series 0032, European Central Bank.
    18. 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.
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    Cited by:
    1. Campos, Nauro F & Leite Barbosa, Renata, 2008. "Paintings and Numbers: An Econometric Investigation of Sales Rates, Prices and Returns in Latin American Art Auctions," IZA Discussion Papers 3445, Institute for the Study of Labor (IZA).
    2. Xosé-Luís Varela-Irimia, 2011. "Age effects, unobserved characteristics and hedonic price indexes: The Spanish car market in the 1990?s," Working Papers XREAP2011-11, Xarxa de Referència en Economia Aplicada (XREAP), revised Aug 2011.
    3. Négyesi, Áron, 2003. "Hogyan mérjük az új gazdaságot?. A termékminőség változásának számbavétele árindexek segítségével
      [How can the new economy be measured?. Estimating change in product quality with th
      ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(11), pages 988-1001.

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