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Index Number Biases during Price Liberalization

Author

Listed:
  • Kent Osband

    (International Monetary Fund)

Abstract

When a formerly centrally planned economy frees prices and allows or compels producers to respond to market signals, conventional measures tend to severely overstate short-run output decline and inflation. The overstatement stems partly from neglect of private sector activity or belated recognition of inflation previously disguised as quality improvements. Even when individual prices and outputs are correctly measured, however, shifts in relative prices consequent to price decontrol create a serious aggregation problem. Moreover, standard indices ignore the deflationary trends in black markets. Theoretically superior indices are devised using a mixture of official and black market prices.

Suggested Citation

  • Kent Osband, 1992. "Index Number Biases during Price Liberalization," IMF Staff Papers, Palgrave Macmillan, vol. 39(2), pages 287-309, June.
    • Handle: RePEc:pal:imfstp:v:39:y:1992:i:2:p:287-309
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    Citations

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    Cited by:

    1. Jan Hanousek & Randall K. Filer, 2003. "Substitution Biases in Price Indexes during Transition," Development and Comp Systems 0306002, University Library of Munich, Germany.
    2. Norbert Holcblat, 1992. "Europe centrale et orientale : des situations de plus en plus diversifiées," Économie et Statistique, Programme National Persée, vol. 260(1), pages 19-28.
    3. Blangiewicz, Maria & Charemza, Wojciech W., 1999. "East European Economic Reform: Some Simulations on a Structural Vector Autoregressive Model," Journal of Policy Modeling, Elsevier, vol. 21(5), pages 535-557, September.
    4. Blangiewicz, Maria & Charemza, Wojciech W., 2001. "East European economic reform: Some simulations on a structural VAR model," Journal of Policy Modeling, Elsevier, vol. 23(2), pages 147-160, February.
    5. Jan Hanousek & Randall K. Filer, 2001. "Evaluating Imperfections and Biases in Price Indexes during Transition," CERGE-EI Working Papers wp186, The Center for Economic Research and Graduate Education - Economics Institute, Prague.

    More about this item

    JEL classification:

    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
    • P24 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - National Income, Product, and Expenditure; Money; Inflation

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