Post-Laspeyres [electronic resource] : The Case for a New Formula for Compiling Consumer Price Indexes / Paul A Armknecht.
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TextSeries: IMF Working Papers; Working Paper ; No. 12/105Publication details: Washington, D.C. : International Monetary Fund, 2012Description: 1 online resource (28 p.)ISBN: 1475502958 :ISSN: 1018-5941Subject(s): Arithmetic | Consumer Price Index | Equation | Estimating | Expenditure Shares | Expenditure | New Zealand | United StatesAdditional physical formats: Print Version:: Post-Laspeyres : The Case for a New Formula for Compiling Consumer Price IndexesOnline resources: IMF e-Library | IMF Book Store Abstract: Consumer price indexes (CPIs) are compiled at the higher (weighted) level using Laspeyres-type arithmetic averages. This paper questions the suitability of such formulas and considers two counterpart alternatives that use geometric averaging, the Geometric Young and the (price-updated) Geometric Lowe. The paper provides a formal decomposition and understanding of the differences between the two. Empirical results are provided using United States CPI data. The findings lead to an advocacy of variants of a hybrid formula suggested by Lent and Dorfman (2009) that substantially reduces bias from Laspeyres-type indexes.
Consumer price indexes (CPIs) are compiled at the higher (weighted) level using Laspeyres-type arithmetic averages. This paper questions the suitability of such formulas and considers two counterpart alternatives that use geometric averaging, the Geometric Young and the (price-updated) Geometric Lowe. The paper provides a formal decomposition and understanding of the differences between the two. Empirical results are provided using United States CPI data. The findings lead to an advocacy of variants of a hybrid formula suggested by Lent and Dorfman (2009) that substantially reduces bias from Laspeyres-type indexes.
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