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Imputation and Price Indexes: Theory and Evidence from the International Price Program

  • Robert Feenstra
  • Erwin Diewert

    (Department of Economics, University of California Davis)

The goal of this paper is to theoretically and empirically demonstrate the consequences of different imputation methods, using recent data from the International Price Program. We suppose that prices are missing due to random or erratic reporting. We consider three different imputation methods: carry-forward, which just assumes that the missing price is the same as in the previous period; cell-mean, which imputes the missing price using either the short-term or long-term index for related commodities; and linear interpolation, which uses the last and next observations for the item to linearly interpolate. Certain hybrid techniques, combining either carry-forward or cell-mean with linear interpolation, are also considered. Our conclusions are: (1) Some imputation is better than no imputation; (2) the short term cell-mean introduces some â??noiseâ?? into the price index: (3) linear interpolation results in less fluctuation of prices than the true series: (4) combining either carry-forward or cell-mean with linear interpolation gives similar results.

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File URL: http://wp.econ.ucdavis.edu/00-12.pdf
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Paper provided by University of California, Davis, Department of Economics in its series Working Papers with number 012.

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Length: 37
Date of creation: 16 Jan 2003
Date of revision:
Handle: RePEc:cda:wpaper:00-12
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Web page: http://www.econ.ucdavis.edu
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  1. Michael F. Bryan & Stephen G. Cecchetti, 1993. "Measuring Core Inflation," NBER Working Papers 4303, National Bureau of Economic Research, Inc.
  2. Wynne, Mark A., 1999. "Core inflation: a review of some conceptual issues," Working Paper Series 0005, European Central Bank.
  3. Diewert, W. Erwin, 1999. "Index Number Approaches To Seasonal Adjustment," Macroeconomic Dynamics, Cambridge University Press, vol. 3(01), pages 48-68, March.
  4. Paul A. Armknecht & Fenella Maitland-Smith, 1999. "Price Imputation and Other Techniques for Dealing with Missing Observations, Seasonality and Quality Change in Price Indices," IMF Working Papers 99/78, International Monetary Fund.
  5. Stephen G. Cecchetti, 1996. "Measuring Short-Run Inflation for Central Bankers," NBER Working Papers 5786, National Bureau of Economic Research, Inc.
  6. Michael F. Bryan & Stephen G. Cecchetti, 1993. "The Consumer Price Index as a Measure of Inflation," NBER Working Papers 4505, National Bureau of Economic Research, Inc.
  7. K.W. Clements & H.Y. Izan, 1987. "The Measurement of Inflation: A stochastic approach," Economics Discussion / Working Papers 87-02, The University of Western Australia, Department of Economics.
  8. repec:cup:macdyn:v:3:y:1999:i:1:p:48-68 is not listed on IDEAS
  9. repec:cup:macdyn:v:2:y:1998:i:4:p:456-71 is not listed on IDEAS
  10. Diewert, W. Erwin, 1998. "High Inflation, Seasonal Commodities, And Annual Index Numbers," Macroeconomic Dynamics, Cambridge University Press, vol. 2(04), pages 456-471, December.
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