Why elementary price index number formulas differ: Evidence on price dispersion |
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Authors: | Mick Silver Saeed Heravi |
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Institution: | aStatistics Department, International Monetary Fund, USA;bCardiff Business School, Cardiff University, Column Drive, Cardiff CF10 3EU, UK |
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Abstract: | Most countries use either the Dutot or Jevons index number formula for the compilation of their consumer price index at the elementary level of aggregation. The difference between the formulas is shown to be accounted for by changes in price dispersion. In turn, some of this difference is shown to be explained by product heterogeneity. Scanner data on television sets (TVs) are used to calculate Dutot and Jevons indexes. The difference between them is successfully explained in terms of changes in price dispersion and much reduced using an hedonic, heterogeneity-controlled Dutot index. |
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Keywords: | Consumer price index Elementary aggregate indexes Hedonic regression Index numbers Relative price dispersion Scanner data |
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