Quality adjustment of European price statistics and the role for hedonics
In this paper we review the well-known problem of how to measure price developments when the quality of the underlying goods and services is changing over time. The importance of appropriate methods to take account of quality change is highlighted from the perspective of monetary policy. In particular, we highlight the need for credible and transparent price indicators. In this context, we review the hedonic approach to calculating quality-adjusted price indices and assess the available information on their effects as well as their potential for improving credibility and comparability. Current practices as regards quality adjustment in the European Union (EU) are also discussed, with particular emphasis on the Harmonised Index of Consumer Prices (HICP). Overall, we give a qualified endorsement of hedonics for specific product categories and make some suggestions about how the work on quality adjustment in the EU can be further developed, focusing in particular on the role of hedonics.
|Date of creation:||May 2004|
|Date of revision:|
|Contact details of provider:|| Postal: 60640 Frankfurt am Main, Germany|
Phone: +49 69 1344 0
Fax: +49 69 1344 6000
Web page: http://www.ecb.europa.eu/
More information through EDIRC
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.:
- Rosen, Sherwin, 1974. "Hedonic Prices and Implicit Markets: Product Differentiation in Pure Competition," Journal of Political Economy, University of Chicago Press, vol. 82(1), pages 34-55, Jan.-Feb..
- Wynne, Mark A. & Rodriguez-Palenzuela, Diego, 2002.
"Measurement bias in the HICP: what do we know, and what do we need to know?,"
Working Paper Series
0131, European Central Bank.
- Mark A. Wynne & Diego Rodriguez-Palenzuela, 2004. "Measurement Bias in the HICP: What do we know and What do we need to know?," Journal of Economic Surveys, Wiley Blackwell, vol. 18(1), pages 79-112, 02.
- Wynne, Mark A. & Rodriguez-Palenzuela, Diego, 2002. "Measurement bias in the HICP: what do we know and what do we need to know?," Working Papers 0206, Federal Reserve Bank of Dallas.
- Robert C. Feenstra, 1995.
"Exact Hedonic Price Indexes,"
NBER Working Papers
5061, National Bureau of Economic Research, Inc.
- Charles R. Hulten, 1997. "Quality change in the CPI," Review, Federal Reserve Bank of St. Louis, issue May, pages 87-100.
- G. Christian Ehemann & Brent R. Moulton, 2001. "Balancing the GDP Account," BEA Papers 0014, Bureau of Economic Analysis.
- Triplett, Jack E, 2001. "Should the Cost-of-Living Index Provide the Conceptual Framework for a Consumer Price Index?," Economic Journal, Royal Economic Society, vol. 111(472), pages F311-34, June.
- Brent R. Moulton & Karin E. Moses, 1997. "Addressing the Quality Change Issue in the Consumer Price Index," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 28(1), pages 305-366.
- Jonker, Nicole, 2002.
"Constructing quality-adjusted price indices: a comparison of hedonic and discrete choice models,"
Working Paper Series
0172, European Central Bank.
- N. Jonker, 2001. "Constructing Quality Adjusted Price Indexes: a Comparison of Hedonic and Discrete Choice Models," WO Research Memoranda (discontinued) 673, Netherlands Central Bank, Research Department.
- Bart Hobijn, 2001. "Is equipment price deflation a statistical artifact?," Staff Reports 139, Federal Reserve Bank of New York.
- Peter J. Klenow, 2003. "Measuring consumption growth: the impact of new and better products," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Win, pages 10-23.
- Gordon, Robert J & Griliches, Zvi, 1997. "Quality Change and New Products," American Economic Review, American Economic Association, vol. 87(2), pages 84-88, May.
- Lieven Baele & Annalisa Ferrando & Peter Hördahl & Elizaveta Krylova & Cyril Monnet, 2004. "Measuring financial integration in the euro area," Occasional Paper Series 14, European Central Bank.
- Robert C. Feenstra & Matthew D. Shapiro, 2003. "Scanner Data and Price Indexes," NBER Books, National Bureau of Economic Research, Inc, number feen03-1, March.
When requesting a correction, please mention this item's handle: RePEc:ecb:ecbops:20040015. 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: (Official Publications)
If references are entirely missing, you can add them using this form.