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The Fisher BCPI: The Bank of Canada’s New Commodity Price Index

Author

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  • Ilan Kolet
  • Ryan Macdonald

Abstract

The prices of commodities produced in Canada have important implications for the performance of the Canadian economy and the conduct of monetary policy. The authors explain an important change to the methodology used to construct the Bank of Canada commodity price index (BCPI). Since its inception, the BCPI has been a fixed-weight index of commodity prices, with weights that were updated roughly once a decade. Such indexes are subject to bias, because output shares change over time. In this paper, the authors use the chain Fisher index method to update the production weights on an annual basis, and expand the BCPI to include a broader set of commodities. They find that the new index, called the Fisher BCPI, is more comprehensive, flexible, and accurate than the fixed-weight index.

Suggested Citation

  • Ilan Kolet & Ryan Macdonald, 2010. "The Fisher BCPI: The Bank of Canada’s New Commodity Price Index," Discussion Papers 10-6, Bank of Canada.
    • Handle: RePEc:bca:bocadp:10-6
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    Cited by:

    1. André Binette & Tony Chernis & Daniel de Munnik, 2017. "Global Real Activity for Canadian Exports: GRACE," Discussion Papers 17-2, Bank of Canada.
    2. Mark Kruger & Kun Mo & Benjamin Sawatzky, 2016. "The Evolution of the Chinese Housing Market and Its Impact on Base Metal Prices," Discussion Papers 16-7, Bank of Canada.

    More about this item

    Keywords

    Inflation and prices; Econometric and statistical methods;

    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General

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