Price Indexes in Time and Space (eBook)

Foreword 5
Contents 8
Contributors 10
Part I Consumer Price Indexes Time-Space Integration 12
Are Integration and Comparison Between CPIs and PPPs Feasible? 13
1 Introduction 13
2 Integration of CPIs and PPPs 14
2.1 The Comparison of CPI Baskets in the Two Countries 15
2.2 The Comparison of CPI and PPI Baskets in Two Countries 17
2.3 Problems and Benefits Involved in Developing an Integrated Approach for the Collection of the Necessary Information for CPIs and PPPs 19
3 A Methodological Approach for Deciding whether to Include Less Comparable but More Representative Products in the PPP Calculation 22
3.1 Inclusion of Less Comparable Products vs Identical Products 22
3.2 Interpretation of the Factors Influencing the PPPs Based on Products with Different Degree of Comparability 25
4 Comparison Between the Computed CPIs and PPPs 27
4.1 Comparing CPIs Across Space 28
4.2 Comparing APPs Over Time 29
5 Concluding Remarks 32
References 33
Retrospective Approximations of Superlative Price Indexes for Years Where Expenditure Data Is Unavailable 35
1 Introduction 35
2 Superlative and LloydMoulton Price Indexes 36
3 Approximating Superlative Price Indexes 38
3.1 Using Lloyd--Moulton Price Indexes 38
3.2 Using Estimated Expenditure Shares 39
4 Lowe CPIs and Approximate Superlative Price Indexes 41
5 Three or More Benchmark Years 44
6 Data and Empirical Evidence 46
6.1 Some Facts and Figures 46
6.2 Empirical Results 48
7 Conclusion 51
References 51
Harmonized Cross Region and Cross Country CPI Time-Space Integration in the Euro-Zone 53
1 Introduction 53
2 The State of the Art 54
3 The TCPIs and the PPPs Elaborated by the EU Individual Countries and by Eurostat. Lost in the Intricacy of the Jungle 59
4 The Dual Nature of CPIs: A Critical Appraisal of the National TCPIs/HTICPs and PPPs Elaborated by the NSOs of the EU Countries and by Eurostat 60
5 Cross Region and Cross Country Integration in an Euro-Zone Harmonized Frame: Some Comments and Proposals 63
6 Conclusion 67
References 68
Part II Consumer Price Indexes in Space 70
Modelling Spatially Correlated Error Structures in the Time-Space Extrapolation of Purchasing Power Parities 71
1 Introduction 71
2 The National Price Levels Model 73
2.1 The Spatial Error Structure 74
3 The RRD Method 74
3.1 The Econometric Formulation of RRD 75
3.1.1 Observation Equations 75
3.1.2 Transition Equations 77
3.2 Estimation and Prediction of PPPs 79
4 Spatial Specifications Considered in the Analysis 79
4.1 Variables Included in the Measure of Economic Distance 81
4.2 Construction of the Distance Score 81
4.3 Construction of the Weights Matrix 82
5 Data and Empirical Results 82
5.1 Data Compilation and Data Construction 82
5.1.1 PPP Data 82
5.1.2 Socio-Economic Variables Included in the Price Level Regression 83
5.1.3 Covariance Variables 83
5.2 Empirical Evidence 84
5.2.1 Parameter Estimates and Tests for Spatial Correlation 84
5.2.2 PPP Predictions and Prediction Performance 90
6 Conclusions 98
7 Appendix: The Construction of the Economic Distance Measure used in the PCW 98
. Variables Included in the Construction 98
. Estimation 99
. Descriptive Statistics for the Variables used to Construct the PCW. Selected Countries Shown. 103
References 103
Price Indexes across Space and Time and the Stochastic Properties of Prices 105
1 Introduction 105
2 Existing Literature 106
3 Price Behaviour and Price Indexes 108
4 A Simulation Experiment 113
4.1 Ensemble Indexes 115
4.2 Time-Based Indexes 117
4.3 Space-Based Indexes 118
5 Application to Real Data 119
6 Conclusion 120
References 121
Intra-National Price Level Differentials: The Italian Experience 123
1 Data Source and Survey Framework 123
1.1 The Usefulness of Existing CPI Data 124
1.2 The Direct Integrating Surveys 125
2 Basic Methodology 127
3 Main Results 128
References 138
Part III Subindexes 139
Consumer Price Indexes: An Analysis of Heterogeneity Across Sub-Populations 140
1 Introduction 140
2 Definition of Experimental Price Indexes 141
3 Data 145
3.1 Harmonisation of HBS and CPI Data 145
3.2 Weights' Identification 146
3.3 Identification of Sub-Groups 147
4 Results 149
4.1 Weights' Effects 149
4.2 Effects of Aggregation System 152
4.3 Changing Basket 153
5 Final Remarks 154
References 155
Price Dispersion: The Case of Pasta 157
1 Introduction and Problem Definition 157
2 Pasta Scanner Dataset Description and Price Dispersion 158
3 Comparability and Representativity: List of Common Brands and List of Common Products 161
4 Notation and Methodological Issues 165
5 Results and Discussion 166
6 Conclusion and Future Work 170
References 172
Measuring the Production of Non-Market Services 173
1 Introduction 173
2 Terminology 175
3 Different Meanings of Outcome 175
3 Competitive Markets, No Quality Change in Products 177
3.1 The Consumer Side 177
3.2 The Producer Side 179
4 Non-Market Production, no Quality Change 180
5 Non-Market Production and Quality Change 183
5.1 Direct Outcome, Stratification and Implicit Quality Adjustment 183
5.2 Indirect Outcome and Quality Adjustment Through Re-Definition of Products 184
5.3 Outcome and Explicit Quality Adjustment 187
6 Box 1. Why Narrow Specifications of Products may not always be Sufficient to Capture Quality Change 188
5.4 Output as the Marginal Contribution to Direct Outcome 189
6 Outcome-based Measures of Health Services: A UK Example 190
6 Conclusions 191
References 192
Part IV Price Indexes in National Accounts 194
Total Factor Productivity Surpluses and Purchasing Power Transfers: An Application to the Italian Economy 195
1 Introduction 195
2 Basic Concepts of Constant Price Measures in the National Account 196
3 Double Deflation and Productivity Analysis 198
4 The Transfer of Productivity Gains 199
4.1 The Distribution Process of the TFP Surpluses: The Case of Italy for the Period 1995--2002 200
5 The Purchasing Power Transfer (PPT) 204
5.1 TFP and Market Surpluses in Italy, for the Period 1995--2002 207
6 Conclusion 209
References 209
Jointly Consistent Price and Quantity Comparisons and the Geo-Logarithmic Family of Price Indexes 211
1 Introduction 211
2 Notation 212
3 The Axioms for Price and Quantity Indexes 214
3.1 Properties of the Cofactor of a Price Index 215
4 The Geo-Logarithmic Family 216
4.1 Axiomatic Properties of Geo-Logarithmic Price Indexes 218
4.2 Properties of the Cofactors of Geo-Logarithmic Price Indexes 221
5 Extension of the Geo-Logarithmic Family 222
5.1 PCH Preserving Transformations 223
5.2 Closure of the Geo-Logarithmic Family 223
6 Conclusion 223
7 Appendix: proof of inequality (36) 224
References 225
Part V Price Indexes in Financial Markets 227
Common Trends in Financial Markets 228
1 Introduction 228
2 The Data 229
3 Methodological Issues: The Conditionally Heteroskedastic Co-Integration Model 234
3.1 Heteroskedasticity-Robust Cointegrating Rank Determination 236
4 The Empirical Analysis 237
5 Conclusions 240
References 241
An Application of Index Numbers Theory to Interest Rates 242
1 Introduction 242
2 Binary Indices and Interest Rates 243
3 From Binary Index to Multiple Period Index 245
4 Application of Indices to MIR - January 2003 to October 2008 247
5 Conclusion 250
References 251
Sector Price Indexes in Financial Markets: Methodological Issues 252
1 Introduction 252
2 Methodological Issues 253
2.1 A New Stock's Classification 253
2.2 Sector Price Index Numbers 255
3 The Data 257
4 The Results 260
4.1 The Estimation of the Latent Class Model 260
4.2 The Synthetic Price Index Numbers 262
4.3 The Implications for Portfolio Analysis 264
5 Conclusions 266
References 267