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Dynamic cost of living index for storable goods

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  • Kozo Ueda

Abstract

Consumers hold inventory for future uses. This study investigates how such intertemporal decisions influence the cost-of-living index (COLI). To this end, I construct a simple dynamic model, in which goods are storable and nonresalable, and prices take either high (regular price) or low values (sales). I then introduce two types of dynamic COLIs. Simulation results show that neither index satisfies both monotonicity and the time reversal test.

Suggested Citation

  • Kozo Ueda, 2019. "Dynamic cost of living index for storable goods," CAMA Working Papers 2019-88, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    • Handle: RePEc:een:camaaa:2019-88
    as

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    References listed on IDEAS

    as
    1. Igal Hendel & Aviv Nevo, 2006. "Sales and consumer inventory," RAND Journal of Economics, RAND Corporation, vol. 37(3), pages 543-561, September.
    2. Nao Sudo & Kozo Ueda & Kota Watanabe & Tsutomu Watanabe, 2018. "Working Less and Bargain Hunting More: Macroimplications of Sales during Japan's Lost Decades," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 50(2-3), pages 449-478, March.
    3. Matthew Osborne, 2018. "Approximating the Cost-of-Living Index for a Storable Good," American Economic Journal: Microeconomics, American Economic Association, vol. 10(2), pages 286-314, May.
    4. Nao Sudo & Kozo Ueda & Kota Watanabe, 2014. "Micro Price Dynamics during Japan's Lost Decades," Asian Economic Policy Review, Japan Center for Economic Research, vol. 9(1), pages 44-64, January.
    5. Igal Hendel & Aviv Nevo, 2006. "Measuring the Implications of Sales and Consumer Inventory Behavior," Econometrica, Econometric Society, vol. 74(6), pages 1637-1673, November.
    6. Ueda, Kozo, 2020. "Dynamic cost of living index for storable goods," Economics Letters, Elsevier, vol. 189(C).
    7. Igal Hendel & Aviv Nevo, 2006. "Sales and Consumer Inventory," RAND Journal of Economics, The RAND Corporation, vol. 37(3), pages 543-561, Autumn.
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    Citations

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    Cited by:

    1. Tsutomu Watanabe & Tomoyoshi Yabu, 2018. "The Demand for Money at the Zero Interest Rate Bound," Working Papers on Central Bank Communication 002, University of Tokyo, Graduate School of Economics.
    2. Ueda, Kozo, 2020. "Dynamic cost of living index for storable goods," Economics Letters, Elsevier, vol. 189(C).
    3. Kozo Ueda & Kota Watanabe & Tsutomu Watanabe, 2021. "Household Inventory, Temporary Sales, and Price Indices," Working Papers on Central Bank Communication 033, University of Tokyo, Graduate School of Economics.
    4. Kozo Ueda & Kota Watanabe & Tsutomu Watanabe, 2020. "Consumer Inventory and the Cost of Living Index: Theory and Some Evidence from Japan," Working Papers on Central Bank Communication 025, University of Tokyo, Graduate School of Economics.

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    More about this item

    Keywords

    consumer inventory; cost-of-living index; price index;
    All these keywords.

    JEL classification:

    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
    • D15 - Microeconomics - - Household Behavior - - - Intertemporal Household Choice; Life Cycle Models and Saving
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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