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Automobile Prices and Quality Changes : A Hedonic Price Analysis of Japanese Automobile Market

Author

Listed:
  • Shigenori Shiratsuka

    (Research Division 1, Institute for Monetary and Economic Studies, Bank of Japan)

Abstract

As an application of the hedonic approach, this paper provides empirical evidence showing why the Japanese CPI has failed to account for quality changes in automobiles. The paper find first that, between 1990-94, quality-adjusted price index for automobiles declined 0.3% annually, while the automobile CPI rose 0.6% ; this decline in the quality-adjusted price index reduced the durable goods CPI by 0.2% per year, and the overall CPI by 0.01%. Second, quality-adjusted price indexes for automobiles vary from size to size and from styling to styling, which implies limited coverage and sampling for the automobile CPI may affect the accuracy of the official CPI. Third, the current methodology used in the CPI to cope with quality adjustment in specification changes has failed to account for quality changes between existing and new automobiles; while the hedonic approach has proved to be an effective way to increase the accuracy of quality adjustment.

Suggested Citation

  • Shigenori Shiratsuka, 1995. "Automobile Prices and Quality Changes : A Hedonic Price Analysis of Japanese Automobile Market," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 13(2), pages 1-44, December.
    • Handle: RePEc:ime:imemes:v:13:y:1995:i:2:p:1-44
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    File URL: http://www.imes.boj.or.jp/research/papers/english/me13-2-1.pdf
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    Citations

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    Cited by:

    1. David Prentice & Xiangkang Yin, 2004. "Constructing a Quality‐Adjusted Price Index for a Heterogeneous Oligopoly," Manchester School, University of Manchester, vol. 72(4), pages 423-442, July.
    2. Yun, Seong Hun & Kim, Yongjae & Kim, Minki, 2019. "Quality-adjusted international price comparisons of mobile telecommunications services," Telecommunications Policy, Elsevier, vol. 43(4), pages 339-352.
    3. Ramírez Muñoz de Toro, Gonzalo R. & Uriarte, Juan I. & Delbianco, Fernando & Larrosa, Juan M.C., 2017. "Un modelo hedónico de precios en línea de automóviles usados en Argentina || A Hedonic Model of Online Prices of Used Cars in Argentina," Revista de Métodos Cuantitativos para la Economía y la Empresa = Journal of Quantitative Methods for Economics and Business Administration, Universidad Pablo de Olavide, Department of Quantitative Methods for Economics and Business Administration, vol. 24(1), pages 25-53, Diciembre.
    4. Sahoko Furuta & Yudai Hatayama & Atsushi Kawakami & Yusuke Oh, 2021. "New Hedonic Quality Adjustment Method using Sparse Estimation," Bank of Japan Working Paper Series 21-E-8, Bank of Japan.
    5. Masahiro Higo & Shigenori Shiratsuka, 2022. "Was Inflation Observed under the First Wave of the COVID-19 Spread in Japan? Scanner Data Evidence for Retailers in Tokyo," Keio-IES Discussion Paper Series 2022-013, Institute for Economics Studies, Keio University.
    6. Sahoko Furuta & Yudai Hatayama & Atsushi Kawakami & Yusuke Oh, 2021. "New Hedonic Quality Adjustment Method using Sparse Estimation," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 39, pages 109-142, November.
    7. Higo, Masahiro & Shiratsuka, Shigenori, 2023. "Consumer price measurement under the first wave of the COVID-19 spread in Japan: Scanner data evidence for retailers in Tokyo," Japan and the World Economy, Elsevier, vol. 65(C).

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