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The Consumer Price Index: Recent Developments


  • Diewert, Erwin


The 2004 International Labour Office Consumer Price Index Manual: Theory and Practice summarized the state of the art for constructing Consumer Price Indexes (CPIs) at that time. In the intervening decade, there have been some significant new developments which are reviewed in this paper. The CPI Manual recommended the use of chained superlative indexes for a month to month CPI. However, subsequent experience with the use of monthly scanner data has shown that a significant chain drift problem can occur. The paper explains the nature of the problem and reviews possible solutions to overcome the problem. The paper also describes the recently developed Time Dummy Product method for constructing elementary index numbers (indexes at lower levels of aggregation where only price information is available).

Suggested Citation

  • Diewert, Erwin, 2013. "The Consumer Price Index: Recent Developments," Economics working papers erwin_diewert-2013-45, Vancouver School of Economics, revised 24 Oct 2013.
  • Handle: RePEc:ubc:bricol:erwin_diewert-2013-45

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    References listed on IDEAS

    1. Neil Crosby & Steven Devaney & Vicki Law, 2012. "Rental depreciation and capital expenditure in the UK commercial real estate market, 1993--2009," Journal of Property Research, Taylor & Francis Journals, vol. 29(3), pages 227-246, March.
    2. Diewert, W E, 1992. "The Measurement of Productivity," Bulletin of Economic Research, Wiley Blackwell, vol. 44(3), pages 163-198, July.
    3. Diewert, W. Erwin & Nakamura, Alice O. & Nakamura, Leonard I., 2009. "The housing bubble and a new approach to accounting for housing in a CPI," Journal of Housing Economics, Elsevier, vol. 18(3), pages 156-171, September.
    4. Timothy J. Dixon & Neil Crosby & Victoria K. Law, 1999. "A critical review of methodologies for measuring rental depreciation applied to UK commercial real estate," Journal of Property Research, Taylor & Francis Journals, vol. 16(2), pages 153-180, January.
    5. Schreyer, Paul, 2009. "User costs and bubbles in land markets," Journal of Housing Economics, Elsevier, vol. 18(3), pages 267-272, September.
    6. Sheharyar Bokhari & David Geltner, 2012. "Estimating Real Estate Price Movements for High Frequency Tradable Indexes in a Scarce Data Environment," The Journal of Real Estate Finance and Economics, Springer, vol. 45(2), pages 522-543, August.
    7. Fisher, Jeffrey D & Geltner, David M & Webb, R Brian, 1994. "Value Indices of Commercial Real Estate: A Comparison of Index Construction Methods," The Journal of Real Estate Finance and Economics, Springer, vol. 9(2), pages 137-164, September.
    8. W. Erwin Diewert, 2005. "Issues in the Measurement of Capital Services, Depreciation, Asset Price Changes, and Interest Rates," NBER Chapters,in: Measuring Capital in the New Economy, pages 479-556 National Bureau of Economic Research, Inc.
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    More about this item


    Consumer Price Indexes; superlative indexes; chain drift; scanner data; Time Product Dummy method; GEKS method for making international comparisons; R;

    JEL classification:

    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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