IDEAS home Printed from https://ideas.repec.org/a/vrs/offsta/v38y2022i1p107-126n16.html
   My bibliography  Save this article

Substitution Bias in the Measurement of Import and Export Price Indices: Causes and Correction

Author

Listed:
  • von Auer Ludwig
  • Shumskikh Alena

    (University of Trier, Fachbereich IV-Finanzwissenschaft, Universitaetsring 15, Trier, 54296, Germany.)

Abstract

The import and export price indices of an economy are usually compiled by some Laspeyres type index. It is well known that such an index formula is prone to substitution bias. Therefore, also the terms of trade (ratio of export and import price index) are likely to be distorted. The underlying substitution bias accumulates over time. The present article introduces a simple and transparent retroactive correction approach that addresses the source of the substitution bias and produces meaningful long-run time series of import and export price levels and, therefore, of the terms of trade. Furthermore, an empirical case study is conducted that demonstrates the efficacy and versatility of the correction approach.

Suggested Citation

  • von Auer Ludwig & Shumskikh Alena, 2022. "Substitution Bias in the Measurement of Import and Export Price Indices: Causes and Correction," Journal of Official Statistics, Sciendo, vol. 38(1), pages 107-126, March.
    • Handle: RePEc:vrs:offsta:v:38:y:2022:i:1:p:107-126:n:16
    DOI: 10.2478/jos-2022-0006
    as

    Download full text from publisher

    File URL: https://doi.org/10.2478/jos-2022-0006
    Download Restriction: no
    File URL: https://libkey.io/10.2478/jos-2022-0006?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Ludwig von Auer & Alena Shumskikh, 2022. "Retrospective Computations of Price Index Numbers: Theory and Application," Research Papers in Economics 2022-01, University of Trier, Department of Economics.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ludwig von Auer, 2024. "Inflation Measurement in the Presence of Stockpiling and Smoothing of Consumption," Research Papers in Economics 2024-02, University of Trier, Department of Economics.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:vrs:offsta:v:38:y:2022:i:1:p:107-126:n:16. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Peter Golla (email available below). General contact details of provider: https://www.sciendo.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.