Mismeasurement of the CPI

Kenn Ariga and Kenji Matsui

in Structural Impediments to Growth in Japan

Published by University of Chicago Press

Published in print November 2003 | ISBN: 9780226060217
Published online February 2013 | e-ISBN: 9780226060231 | DOI:
Mismeasurement of the CPI

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This chapter investigates the consumer price index (CPI) to help elucidate the nature of the problems commonly found in many important official economic statistics of Japan. First, it offers an overview of official statistics in Japan, points out several important deficiencies, and then reviews key issues in the CPI. Using this background, potential problems in several major aspects of the CPI are investigated. These include data collection procedures (including how discounted prices are handled), services, quality change and new products, and aggregation issues (substitution across time, brands, and stores). Next, the chapter looks at a discrepancy between CPI and wholesale price index that probably relates to differences in how quality adjustments are made, and some hitherto neglected aspects of the measurement problem, relating to shopping and storage behaviors. From this analysis, it offers a tentative assessment of the magnitude of the CPI inflation rate bias, and suggests ways to improve the statistics in general and the CPI in particular.

Keywords: consumer price index; Japanese economy; economic statistics; wholesale price index; inflation rate

Chapter.  16309 words.  Illustrated.

Subjects: Business and Management

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