Estimating Commodity Substitution Bias in the Irish Inflation Rate Statistics during the Financial Crisis
Measures such as the Consumer Price Index are important economic indicators setting out price changes in the Irish economy over time. Such measures, however, are subject to various types of measurement bias. The latter can include Commodity Substitution Bias whereby the weights assigned to each item in a representative basket of goods and services cease to fully reflect consumer expenditure patterns over time, and particularly during a period of economic upheaval. This, in turn, can lead to the overstatement (or understatement) of inflation. The Central Statistics Office (CSO) now updates the relevant weights every year, thereby reducing the impact of this bias. In this article, we have endeavoured to estimate the size of the bias in the period leading up to the introduction of the new methodology in 2012. The results presented here indicate that the rate of inflation was slightly understated. The degree of this measurement bias was not significantly higher than that identified in other countries in which this phenomenon has been examined, albeit that in the latter countries an upward bias (or overstatement) was found.
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.:
- David E. Lebow & Jeremy B. Rudd, 2003. "Measurement Error in the Consumer Price Index: Where Do We Stand?," Journal of Economic Literature, American Economic Association, vol. 41(1), pages 159-201, March.
- James Rossiter, 2005. "Measurement Bias in the Canadian Consumer Price Index," Staff Working Papers 05-39, Bank of Canada.
When requesting a correction, please mention this item's handle: RePEc:eso:journl:v:47:y:2016:i:3:p:327-337. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Martina Lawless)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.