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Measuring inflation using price indices

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  • Fernando Martins

Abstract

This study analyzes the measurement of inflation based on price indices by underlying a number of conceptual and operational issues to be taken into account by users when evaluating price behavior. The uncertainties associated with the calculation of price indices suggest that the analysis of inflation developments should have a holistic approach, based on a number of alternative measures and sources of information, particularly when the preferred inflation monitoring index is at one of the extremes of the spectrum of the conceptual calculation possibilities. This is particularly relevant as the inflation rate is presented in the form of a point estimate not subject to revision. The study also analyzes the particular case of the Harmonized Index of Consumer Prices and its central role in the European Central Bank monetary policystrategy.

Suggested Citation

  • Fernando Martins, . "Measuring inflation using price indices," Economic Bulletin and Financial Stability Report Articles and Banco de Portugal Economic Studies, Banco de Portugal, Economics and Research Department.
    • Handle: RePEc:ptu:bdpart:r202403
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    File URL: https://www.bportugal.pt/sites/default/files/documents/2024-01/RE202403_en.pdf
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    References listed on IDEAS

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    1. W. Erwin Diewert, 2002. "Harmonized Indexes of Consumer Prices: Their Conceptual Foundations," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 138(IV), pages 547-637, December.
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