Do Unit Value Export, Import, and Terms-of-Trade Indices Misrepresent Price Indices?

Unit value export and import indices compiled from returns to customs authorities are often used as surrogates for price indices in the analysis of inflation transmission, terms of trade (effects), and to deflate import and export value series to derive volume series. Their widespread use is mainly due to their low cost relative to establishment price surveys. This paper provides evidence of substantial errors and bias in their representation of such price changes. Their continued use would mislead economic analysis. The paper considers the efficacy of alternative strategies for their improvement, and argues for a move to establishment-based price surveys. IMF Staff Papers (2009) 56, 297–322. doi:10.1057/imfsp.2008.24; published online 23 September 2008