Measurement bias in the HICP: what do we know

Measurement bias in the HICP: what do we know - ECB

EUROPEAN
CENTRAL
BANK
WO R K I N G PA P E R S E R I E S
WORKING PAPER NO. 131
MEASUREMENT BIAS IN THE
HICP: WHAT DO WE KNOW,
AND WHAT DO WE NEED
TO KNOW?
BY MARK A. WYNNE
AND DIEGO RODRÍGUEZPALENZUELA
March 2002
EUROPEAN
CENTRAL
BANK
WO R K I N G PA P E R S E R I E S
WORKING PAPER NO. 131
MEASUREMENT BIAS IN THE
HICP: WHAT DO WE KNOW,
AND WHAT DO WE NEED
TO KNOW?*
BY MARK A. WYNNE**
AND DIEGO RODRÍGUEZPALENZUELA***
March 2002
*
This paper was presented at the CEPR/ECB workshop on Issues in the measurement of price indices, held at the ECB on
16/17 November 2001.
The views expressed are those of the authors and do not necessarily reflect the views of the European Central Bank, the
Federal Reserve Bank of Dallas or the Federal Reserve System. We thank Eric Millis for outstanding research assistance,
an anonymous referee for comments that greatly improved the paper, and conference participants for helpful suggestions.
** Research Department, Federal Reserve Bank of Dallas, 2200 North Pearl Street, Dallas TX75201, USA,
[email protected]
*** DG Economics, European Central Bank, Kaiserstraße 29, Frankfurt am Main 60311, Germany, [email protected]
© European Central Bank, 2002
Address
Postal address
Telephone
Internet
Fax
Telex
Kaiserstrasse 29
D-60311 Frankfurt am Main
Germany
Postfach 16 03 19
D-60066 Frankfurt am Main
Germany
+49 69 1344 0
http://www.ecb.int
+49 69 1344 6000
411 144 ecb d
All rights reserved.
Reproduction for educational and non-commercial purposes is permitted provided that the source is acknowledged.
The views expressed in this paper are those of the authors and do not necessarily reflect those of the European Central Bank.
ISSN 1561-0810
Contents
Abstract
4
Non-technical summary
5
1
Introduction
8
2
The Harmonized Index of Consumer Prices (HICP)
11
3
What do we know about bias in measures of consumer price inflation
in Europe?
3.1 Post-Boskin reviews
3.2 Ongoing research
3.3 Indirect approaches to inferring measurement error
16
18
20
29
4
What do we need to know?
32
5
Concluding observations
42
References
43
Tables and figures
49
European Central Bank Working Paper Series
59
ECB Working Paper No 131 March 2002
3
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