IDEAS home Printed from https://ideas.repec.org/a/pid/journl/v47y2008i3p267-285.html
   My bibliography  Save this article

Biases in Consumer Price Index Methodology in Pakistan: Suggestions for Improvements

Author

Listed:
  • Zahid Asghar

    (Quaid-i-Azam university, Islamabad.)

  • Mahmood Khalid

    (Pakistan Institute of Development Economics, Islamabad.)

Abstract

The issues relating to the complexity of the measurement of the Consumer Price Index (CPI) which is regarded as the best and most well known indicator of inflationary trends and without referring to which economic policies cannot be evaluated have long been debated. Any measurement error in CPI may over or understate inflation, which can have serious repercussions on monetary, fiscal and other economic management policies. The report of the Boskin Commission [Boskin, et al. (1996)] has identified the possible sources of bias in the CPI. These biases which this study has also corroborated through a primary survey of selected households relate to commodity and outlet substitution, quality adjustment and new product introduction as well as index calculation in the existing methodologies. In this paper these biases have been evaluated for Pakistan and ways to improve the construction of the Index have been suggested. Other issues in Pakistan relate to selecting a representative product (or good), defining average quality, data collection, weights determination and base year change. The use of the Geometric means index formula and Laspeyre’s Index to reduce the formula bias has been proposed in this study.

Suggested Citation

  • Zahid Asghar & Mahmood Khalid, 2008. "Biases in Consumer Price Index Methodology in Pakistan: Suggestions for Improvements," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 47(3), pages 267-285.
    • Handle: RePEc:pid:journl:v:47:y:2008:i:3:p:267-285
    as

    Download full text from publisher

    File URL: http://www.pide.org.pk/pdf/Volume47/Issue3-2008.pdf
    Download Restriction: Access to the full text is restricted. Please contact our publication Division for full article Email: publications@pide.org.pk Phone: +92-51-9248089
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Keywords

    Consumer Price Index; Biases in CPI; CPI Formulae;
    All these keywords.

    JEL classification:

    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pid:journl:v:47:y:2008:i:3:p:267-285. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Khurram Iqbal (email available below). General contact details of provider: https://edirc.repec.org/data/pideipk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.