The Harmonized Index of Consumer Prices (HICP) is the single most important indicator of inflation used by the European Central Bank. Sections 2 to 4 of the paper look at the theory of inflation indexes that could be used as target indexes of inflation. A Consumer Price Index (CPI) emerges as perhaps the most useful target index. Four different approaches to index number theory are reviewed and the "best" index number formula from each perspective is determined. Section 6 looks at the methodology of the HICP in the light of the previous sections. Section 7 looks at some of the difficult measurement problems that must be addressed in a CPI or an HICP. These problems include the treatment of quality change, substitution or representativity bias, chained versus fixed base indexes, the choice of formula at the lowest level of aggregation and the treatment of owner occupied housing and seasonal commodities.

The Measurement of Real Product.

Harmonized Indexes of Consumer Prices: Their Conceptual Foundations

O UR understanding of the serviceproducing sector of the economy is seriously constrained by the inadequacy of measures of real output for the major service industries. Analyses of industry growth and productivity are only as good as the industry output measures on which they are based; and for many service industries (especially finance, insurance, government administration, health services and education) the real output measures that are generally adopted are poor indeed. In some cases production in the service sector, as measured in the national accounts, is no more than an index of labor input, with the result that the calculation of productivity change is essentially a tautological exercise. In almost all cases economists have had to reconcile themselves to the fact that at least part of the disparity in productivity growth between the service and goods-producing industries is a statistical illusion resulting from the inadequacy of existing data and techniques of measurement.

Measuring the real output of the life insurance industry

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The Measurement of Business Capital, Income and Performance

The role of the service sector in Soviet GNP and productivity estimates

The reliability of national accounts is determined by the adequacy of a great variety of data sources and estimating methods. This inquiry focuses on major conceptual and methodological problems, and while it does not solve the reliability problem, it provides a framework for reliability analysis and suggests criteria for the evaluation of results; it also assists the producers of national accounts in determining the major trade-offs between different areas of possible data improvement.

The Measurement of Real Product.

Citations

Harmonized Indexes of Consumer Prices: Their Conceptual Foundations

Measuring the real output of the life insurance industry

The Measurement of Business Capital, Income and Performance

The role of the service sector in Soviet GNP and productivity estimates

Reliability criteria for national accounts

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