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Bias in the Consumer Price Index: What Is the Evidence?

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  • Brent R. Moulton

Abstract

Recent research has suggested that the upward bias of the U.S. consumer price index may be significant, and correcting the biases would have important long-run effects on the federal budget deficit. The author describes the sampling procedures used in constructing the consumer price index, and gives simple examples of formula bias and quality adjustment. He then reviews the empirical evidence, attempting to show which biases are reliably estimated and which estimates of bias are based on extrapolation and guesswork. The author discusses possibilities for further research leading to potential improvements in the consumer price index.

Suggested Citation

  • Brent R. Moulton, 1996. "Bias in the Consumer Price Index: What Is the Evidence?," Journal of Economic Perspectives, American Economic Association, vol. 10(4), pages 159-177, Fall.
    • Handle: RePEc:aea:jecper:v:10:y:1996:i:4:p:159-77
    Note: DOI: 10.1257/jep.10.4.159
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    File URL: http://www.aeaweb.org/articles.php?doi=10.1257/jep.10.4.159
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    References listed on IDEAS

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    1. Timothy F. Bresnahan & Robert J. Gordon, 1996. "The Economics of New Goods," NBER Books, National Bureau of Economic Research, Inc, number bres96-1.
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    More about this item

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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