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The Path-Dependence Bias in Approximating Local Price Levels by CPIs

Journal of Economics Library

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Title The Path-Dependence Bias in Approximating Local Price Levels by CPIs
 
Creator GLUSCHENKO, Konstantin; Institute of Economics and Industrial Engineering, Siberian Branch of the Russian Academy of Sciences, Russia;
and
Novosibirsk State University, Russia

IEIE SB RAS, pr. Lavrentieva 17, 630090 Novosibirsk, Russia.
Tel.: +7 383 330 2548;
fax: +7 383 330 2580.
 
Subject Spatial price index; Inflation; Divisia index; Nonhomothetic preferences; Demand system.
C15; C43; E31; R19.
 
Description Abstract. Lacking data on price levels across locations, economists are forced to proxy them. One method is to extrapolate the price levels known for locations in some point in time to another point by multiplying the initial price levels by the local CPIs. With the use of simulation experiments, this paper demonstrates that such a method is inadequate, since the path dependence of CPI alone produces considerable biases distorting cross-location comparisons of price levels.Keywords. Spatial price index, Inflation; Divisia index, Nonhomothetic preferences, Demand system.JEL. C15, C43, E31, R19.
 
Publisher Journal of Economics Library
 
Contributor —
 
Date 2016-03-18
 
Type info:eu-repo/semantics/article
info:eu-repo/semantics/publishedVersion
Peer-reviewed Article
 
Format application/pdf
 
Identifier http://www.kspjournals.org/index.php/JEL/article/view/667
10.1453/jel.v3i1.667
 
Source Journal of Economics Library; Vol 3, No 1 (2016): March; 69-76
2149-2379
 
Language eng
 
Relation http://www.kspjournals.org/index.php/JEL/article/view/667/744
 
Rights Copyright (c) 2016 Journal of Economics Library
http://creativecommons.org/licenses/by-nc/4.0