The Path-Dependence Bias in Approximating Local Price Levels by CPIs

Lacking data on price levels across locations, economists are forced to proxy them. One method is to extrapolate the price levels known for locations in some point in time to another point by multiplying the initial price levels by the local CPIs. With the use of simulation experiments, this paper demonstrates that such a method is inadequate, since the path dependence of CPI alone produces considerable biases distorting cross-location comparisons of price levels.

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Year of publication:	2016-01-21
Authors:	Gluschenko, Konstantin

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Type of publication:	Book / Working Paper
Language:	English
Notes:	Gluschenko, Konstantin (2016): The Path-Dependence Bias in Approximating Local Price Levels by CPIs.
Classification:	C15 - Statistical Simulation Methods; Monte Carlo Methods ; C43 - Index Numbers and Aggregation ; E31 - Price Level; Inflation; Deflation ; R19 - General Regional Economics. Other
Source:	BASE

Persistent link: https://www.econbiz.de/10015250493