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CPI Bias in Korea

Author

Listed:
  • Chung, Chul

    (Korea Institute for International Economic Policy)

  • Kim , Bonggeun

    (Sungkyunkwan University)

  • Park , Myung-Ho

    (Korea Institute of Public Finance)

Abstract

We estimate the CPI bias in Korea by employing the approach of Engel's Law as suggested by Hamilton (2001). This paper is the first attempt to estimate the bias using Korean panel data, Korean Labor and Income Panel Study(KLIPS). Following Hamilton's model with non­linear specification correction, our estimation result shows that the cumulative CPI bias over the sample period (2000-2005) was 0.7 percent annually. This CPI bias implies that about 21 percent of the inflation rate during the period can be attributed to the bias. In light of purchasing power parity, we provide an interpretation of the estimated bias.

Suggested Citation

  • Chung, Chul & Kim , Bonggeun & Park , Myung-Ho, 2007. "CPI Bias in Korea," East Asian Economic Review, Korea Institute for International Economic Policy, vol. 11(2), pages 261-282, December.
    • Handle: RePEc:ris:eaerev:0150
    DOI: 10.11644/KIEP.JEAI.2007.11.2.176
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    Cited by:

    1. John Gibson & Bonggeun Kim & Chul Chung, 2008. "Using Panel Data to Exactly Estimate Under-Reporting by the Self-Employed," Working Papers in Economics 08/15, University of Waikato.

    More about this item

    Keywords

    CPI Bias; Engels Law; AIDS Estimation;
    All these keywords.

    JEL classification:

    • D10 - Microeconomics - - Household Behavior - - - General
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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