World Economics - Insight , Analysis and Data

World Economics - Insight , Analysis and Data
What a Consumer Price Index Can’t Do
Ralph Turvey
World Economics, September 2004

A monthly consumer price index traces changes in the monthly cost of a year’s consumption using a sample of prices. But in some months the prices that can be sampled will temporarily exclude some of the products that were bought in the base year, Christmas trees providing a textbook example. Worse still, it becomes permanently impossible to observe prices for sampled products that have been completely superseded. There are methods for dealing with these two problems, but they leave serious and irremediable defects in the index.
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