Showing papers on "Consumer price index published in 1988"

Commodity Prices as a Leading Indicator of Inflation

Abstract: Commodity prices may be a leading indicator of inflation, because of the relative importance of flexible auction markets for the determination of these prices. Empirical tests using data for the large industrial countries as a group suggest that changes in commodity prices tend to lead those in consumer prices, and that the inclusion of commodity prices significantly improves the fit of regressions of a multi-country consumer price index. However, there does not appear to be a reliable long-run relationship between the level of commodity prices and the level of consumer prices.

Housing Depreciation and Aging Bias in the Consumer Price Index

Abstract: I use hedonic regression methods to estimate average rental housing physical depreciation for areas of the United States. I estimate downward quality bias of the U.S. consumer price index (CPI) caused by rental-housing physical depreciation, and I develop methods to correct the CPI for such aging bias. My physical depreciation estimates imply that recent percentage changes in the U.S. CPI shelter-cost indexes are downward biased by .3 to .4 annually. Such bias is nonnegligible because recent annual changes in the CPI shelter-cost indexes have ranged between 3.5% and 6.8% for various regions. My results also imply that rent-controlled housing has depreciated faster than other rental housing.

Commodity Prices as a Leading Indicator of Inflation

Abstract: This paper studies the value of broad commodity price indexes as predictors of consumer price inflation in the G-7 industrial countries After an introduction, the paper discusses the theoretical relationship between commodity and consumer prices and the conditions under which, in general, one would expect commodity prices to be a leading indicator of inflation It then presents tests of the relationships between conventional broad indexes of commodity prices and consumer prices, and uses the data on individual commodities to generate the optimum weights in a commodity price index for forecasting G-7 inflation We find that commodity and consumer prices are not co-integrated; the hypothesis that there is a reliable long-run relationship between the level of commodity prices and the level of consumer prices may be rejected There is a tendency for changes in commodity prices to lead those in consumer prices, at least when the data are denominated in a broad index of major-country currencies However, although the inclusion of commodity prices significantly improves the in-sample fit of regressions of an aggregate (multi-country) consumer price index, the results may not be sufficiently stable to improve post-sample forecasts Estimated alternative commodity price indexes, in which the weights are chosen so as to minimize the residual variance in aggregate inflation regressions, track the behavior of the aggregate CPI reasonably well in-sample However, the estimated indexes work only moderately well in post-sample predictions, and they do not appear to offer significant advantages over the conventional export weighted index Perhaps the most important result is that turning points in commodity-price inflation frequently precede turning points in consumer-price inflation for the large industrial countries as a group

Quality, quantity, and spatial variation of price: Estimating price elasticities from cross-sectional data

Abstract: The paper is concerned with the development and implementation of a methodology for estimating own and cross-price elasticities of demand using cross-section household survey data. In the technique developed here, market prices are treated as unobservable variables that affect quantities purchased, and that determine observed unit values with both measurement error and quality effects. Since the primary sampling units in household surveys are typically clusters of households that live together in the same village and are surveyed at the same time, it is plausible that there is no genuine variation in market prices within each cluster. A within-cluster estimator can therefore treat market prices as unobservable fixed effects and estimate Engel curves and quality effects, as well as the measurement error variances and covariances. The between cluster covariance of corrected unit values and quantities can then be used to estimate the price elasticities. Data from a 1979 household survey from the Cote d'Ivoire are used to estimate price elasticities for beef, meat, fish, cereals and starches. The results suggest that the measurement error effects are large and are variable between goods and regions so that elasticities give little guidance to the true magnitudes.

The Precision of Consumer Price Indices Caused by the Sampling Variability of Budget Surveys; an Example

Abstract: A consumer price index number (CPI) is the result of combining data from various complex sample surveys In the present paper we concentrate on but one aspect of the accuracy of a CPI, namely the variance due to the sampling variability of the budget survey(s) from which the weighting coefficients are derived Using the individual budget survey data the variance of a CPI can be estimated by means of the method of balanced half samples This method is applied to several types of CPI’s and to CPI’s for different groups of households

Price Control in the Management of an Economic Crisis: The National Price Commission in Tanzania

Abstract: The system of comprehensive price controls in Tanzania was established under the Regulation of Prices Act of 1973. Prior to that, price controls applied to a few urban consumer staples including beer, matches, sugar, beans, rice, wheat and maize flour, bread, grey sheeting and khanga, a popular dressing material. By May, 1973, four hundred items had been put on the price control list. The timing of the act was due to several possible influences. As a result of the Arusha Declaration in 1967, the early 1970s had seen an increasing regulation of the economy with the nationalization of rental housing, the enactment of a drastically progressive income tax, and the nucleation of the rural population in villages. In 1967 the government adopted a wages, incomes and prices policy which placed restraints on the growth of wages. The control of prices was, therefore, a logical consequence of this policy. On the economic front, there had been drastic price increases in late 1972 and early 1973 partly arising from a worldwide spurt in inflation. In the subsequent period, starting mid-1970s, inflation increased even faster. Using 1976/77 as the base year, the National Consumer Price Index (hereafter, NCPI) increased from 42.4 in 1970 to 52.8 in 1973, 156.7 in 1980 and 775.2 in 1986. The minimum wage earners' price index in the principal city of Dar es Salaam which was 33.4 in 1970, rose to 41.7 in 1973, 165.2 in 1980 and hit 787.9 in 1986. For the same sub periods, the middle-grade civil servants' price indices were 42.3, 50.7, 176.6, and 911.5. Increasingly, the response of the government to these developments was to resort to price controls for the management of inflation. In early 1973 the government formed the price control task force and charged it with the responsibility of fixing ceiling prices of so-called essential items. Using the 1969 Household Budget Survey, the task force fixed maximum prices of about four hundred items within four weeks and came up with a comprehensive price list of about 1140 items which was published in May, 1973 under the Price Control Ordinance of 1951.

Estimation of Laspeyres Price Indexes Using the Prediction Approach for Finite Population Sampling

Abstract: Estimators of chain and fixed-base Laspeyres price indexes are studied using the prediction approach to finite population sampling. The estimators include some that are based on those used in several U.S. government index programs and others derived from prediction models. Biases and variances of the estimators are studied for a case in which the reference period index weights are unknown for nonsample items. Under a model for a one-period price change in which items have common within-stratum means, unbiased estimators can be constructed, but under a more general regression model, special sample balance conditions are needed for unbiasedness of those estimators. The theory for the estimators of fixed-base indexes is illustrated in an empirical study using a population of items priced for the U.S. Consumer Price Index.

An Analysis of Oil Price Shocks on the Colorado Economy Using Vector Autoregression

Abstract: This paper analyzes the effects of oil price shocks on the Colorado economy by using the innovation-accounting technique of Sims (1980) to study the channels of influence. The paper demonstrates that a time series model can be used to model a regional economy by integrating both macro and regional factors in a vector autoregression. A six-variable vector autoregression containing three macro variables (real oil price, interest rate and real GNP) and three regional variables (employment, real income, and consumer price index) is analyzed. The oil price variable is found to be exogenous to the entire system, and all three macro variables are exogenous to the local economy. A positive oil price shock has been found to affect RGNP negatively. The influence of oil price shocks on employment and income in Colorado also is negative, meaning that, although it is an oil-producing state, Colorado does not benefit from a higher oil price.

Demand For Gasoline: An Application of A New Selection Model Procedure

Abstract: In recent years there has been a growing number of efforts to model the demand for gasoline and its relationship to the underlying demand for transportation services. Many econometric models have been estimated using temporal data (Ramsey et al. (1975), Dahl (1979) and Tishler (1983)), cross section data (Wheaton (1982)), or pooling (Archibald and Gillingham (1980) and Baltagi and Griffin (1983)). One of the main objectives of these studies has been to determine the gasoline price elasticity; some summary results can be seen in Wheaton (1982) and Dahl (1979).

Cost-of-Living Adjustments for Social Security Benefits: Their Impact on the Incomes of the Elderly

Abstract: In 1973 Congress passed legislation requiring that Social Security benefits be adjusted annually according to changes in the Consumer Price Index (CPI). The intent of this provision was to insure that adjustments in benefits would be made on a regular basis and that Social Security recipients, most of whom were elderly and retired, would not suffer a decrease in real benefits during inflationary periods. Since 1973 the combination of rapid inflation, slow growth in real wages, unemployment and an increased elderly population has strained the Social Security system’s financial resources to the point where the solvency of the Social Security system has been threatened. Recent reforms have included a one-time six-month postponement of the cost-of-living adjustment.

Consumer price indices adjusted for indirect taxes and subsidies in the Netherlands

Abstract: Consumer price indices adjusted for changes of the rates of indirect taxes and subsidies play an important part in socio-economic life A so-called table-adjustment factor is used in the Nether­ lands for the establishment of the inflation correction of eg income tax The use of the adjusted consumer price index for the purpose of wage indexation constitutes a second application The background for and use of adjusted indices in the Netherlands can illustrate various related problems