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The Path-Dependence Bias in Approximating Local Price Levels by CPIs

Author

Listed:
  • Konstantin GLUSCHENKO

    (Institute of Economics and Industrial Engineering, Russia.)

Abstract

Lacking data on price levels across locations, economists are forced to proxy them. One method is to extrapolate the price levels known for locations in some point in time to another point by multiplying the initial price levels by the local CPIs. With the use of simulation experiments, this paper demonstrates that such a method is inadequate, since the path dependence of CPI alone produces considerable biases distorting cross-location comparisons of price levels.

Suggested Citation

  • Konstantin GLUSCHENKO, 2016. "The Path-Dependence Bias in Approximating Local Price Levels by CPIs," Journal of Economics Library, EconSciences Journals, vol. 3(1), pages 69-76, March.
    • Handle: RePEc:cvv:journ5:v:3:y:2016:i:1:p:69-76
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    Cited by:

    1. K. P. Gluschenko, 2022. "Costs of Living and Real Incomes in the Russian Regions," Regional Research of Russia, Springer, vol. 12(3), pages 365-377, September.

    More about this item

    Keywords

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    JEL classification:

    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • R19 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Other

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