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Constructing Price Indexes across Space and Time: The Case of the European Union

  • Robert J. Hill

This paper considers the problem of how to construct and reconcile price indexes across space and time. A general taxonomy of panel price index methods, containing four broad classes, is proposed, along with five criteria for discriminating between them. Methods from each of the four classes are then used to compute spatial and temporal price indexes for the 15 countries of the European Union (EU) over the period 1995–2000. Using these panel price indexes, I test whether or not price levels and relative prices converged across the EU over this period.

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Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 94 (2004)
Issue (Month): 5 (December)
Pages: 1379-1410

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Handle: RePEc:aea:aecrev:v:94:y:2004:i:5:p:1379-1410
Note: DOI: 10.1257/0002828043052178
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  1. Allen, Robert C & Diewert, W Erwin, 1981. "Direct versus Implicit Superlative Index Number Formulae," The Review of Economics and Statistics, MIT Press, vol. 63(3), pages 430-35, August.
  2. Balk, B.M., 2001. "Aggregation Methods in International Comparisons," ERIM Report Series Research in Management ERS-2001-41-MKT, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
  3. Caves, Douglas W & Christensen, Laurits R & Diewert, W Erwin, 1982. "Multilateral Comparisons of Output, Input, and Productivity Using Superlative Index Numbers," Economic Journal, Royal Economic Society, vol. 92(365), pages 73-86, March.
  4. Diewert, W. E., 1976. "Exact and superlative index numbers," Journal of Econometrics, Elsevier, vol. 4(2), pages 115-145, May.
  5. Bhagwati, Jagdish N, 1984. "Why Are Services Cheaper in the Poor Countries?," Economic Journal, Royal Economic Society, vol. 94(374), pages 279-86, June.
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