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Improving the preliminary values of the chained CPI-U

Improving the preliminary values of the chained CPI-U This paper employs a constant-elasticity of substitution (CES) index formula to improve the accuracy of the preliminary values of the Chained Consumer Price Index for All Urban Consumers (C-CPI-U). Using the CES behavioural model, I present estimates of the overall extent of consumer response to relative price changes exhibited in Consumer Expenditure Survey data for 1999–2008. The associated parameter estimates are then used to develop CES forecasts of the final C-CPI-U index values. Simulations demonstrate that use of the CES approach over the last several years would have resulted in smaller index revisions between the preliminary and final C-CPI-U releases. Looking to the future, CES-based preliminary estimates could increase the usefulness of the C-CPI-U to government programs and other users. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Economic and Social Measurement IOS Press

Improving the preliminary values of the chained CPI-U

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Publisher
IOS Press
Copyright
Copyright © 2011 by IOS Press, Inc
ISSN
0747-9662
eISSN
1875-8932
DOI
10.3233/JEM-2011-0341
Publisher site
See Article on Publisher Site

Abstract

This paper employs a constant-elasticity of substitution (CES) index formula to improve the accuracy of the preliminary values of the Chained Consumer Price Index for All Urban Consumers (C-CPI-U). Using the CES behavioural model, I present estimates of the overall extent of consumer response to relative price changes exhibited in Consumer Expenditure Survey data for 1999–2008. The associated parameter estimates are then used to develop CES forecasts of the final C-CPI-U index values. Simulations demonstrate that use of the CES approach over the last several years would have resulted in smaller index revisions between the preliminary and final C-CPI-U releases. Looking to the future, CES-based preliminary estimates could increase the usefulness of the C-CPI-U to government programs and other users.

Journal

Journal of Economic and Social Measurement – IOS Press

Published: Jan 1, 2011

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