DSO-Design
Statistical Methodology and Production Direction
CONSUMER PRICE INDEX (CPI)
GENERAL METHODOLOGY
November 2015
NATIONAL ADMINISTRATIVE DEPARTMENT OF STATISTICS
MAURICIO PERFETTI DEL CORRAL
Chief Statistician
CARLOS FELIPE PRADA LOMBO
Deputy Chief Statistician
LUIS HUMBERTO MOLINA MORENO
General Secretary
Technical Directors
EDUARDO EFRAÍN FREIRE DELGADO
Methodology and Statistical Production
JUAN FRANCISCO MARTÍNEZ
Synthesis and National Accounts
LILIANA ACEVEDO ARENAS
Censuses and Demography
RAMÓN RICARDO VALENZUELA
Regulation, Planning, Standardization and Normalization
MIGUEL ANGEL CÁRDENAS CONTRERAS
Geo-statistics
ERIKA MOSQUERA ORTEGA
Dissemination, Trade and Statistical Culture
Bogotá, D. C., 2015
© DANE, 2015
No reproduction, partial or full, may be undertaken without prior authorization
from the National Administrative Department of Statistics, Colombia.
Direction of Methodology and Statistical Production (DIMPE)
Eduardo Efraín Freire Delgado
Technical Coordination1
María Ximena Caicedo Moreno (coordinator), Clara Inés Gutiérrez Perdomo,
María Teresa Rojas Linares, Jorge Andrés Tenorio Neira, Alexander González
Coca, Vanesa Montoya Naranjo, Diana Marcela Sánchez Castro and Julieth
Alejandra Solano Villa.
Technical staff
Sample Design: Irma Inés Parra Ramírez (coordinator), Oscar Andrés Bautista
Alfonso, Nancy Janneth Rodriguez Rodriguez; Systems Design: Néstor Alonso
Valbuena Gómez (coordinator), Jakeline Suárez Cabezas. Logistics: Marisol
Sabogal Hoyos (coordinator).
_________________________________________
1
The Technical Coordination, that previously developed the methodology of the investigation, was in
charge of Eduardo Efraín Freire Delgado, with the collaboration of José Moncada Mantilla, Louis Marc
Ducharme, Édgar Sardi Perea, Dora Sanchez de Aponte, Ruth Orjuela de Nensthiel, Luis Carlos Gomez,
Manuel Ramirez, Alvaro Montoya Castillo and Ambrosio Bazan.
Advisory equipment
Adolfo León Cobo Serna, Alejandro Reyes González, Carlos Alfonso Huertas
Campos, José David Pulido Pescador, Héctor Manuel Zarate Solano (Banco de la
República), Gabriel Armando Piraquive Galeano (National Planning Department)
and Camilo Herrera Mora (Raddar).
International advisers
Louis Marc Ducharme (Director Prices and Enterprises Statistics, StatisticsCanada) Jacob Ryten (Director Prices and Enterprises Statistics, StatisticsCanada).
Design and Layout
Direction of Diffusion, Trade and Statistical Culture, DANE
ISSN 0120 - 7423
CONTENTS
FOREWORD…………………………………………………………………………………………………………… 7
INTRODUCTION .....................................................................................................................8
1. BACKGROUND ..................................................................................................................10
2. DESIGN OF THE RESEARCH ..............................................................................................14
2.1. THEMATIC DESIGN.....................................................................................................14
2.1.1. Needs of information ............................................................................................ 14
2.1.2. Objectives............................................................................................................... 14
2.1.3. Scope ...................................................................................................................... 15
2.1.4 Reference framework ............................................................................................ 15
2.1.5. Design of indicators .............................................................................................. 22
2.1.6. Planning of results................................................................................................. 48
2.1.7. Design of the questionnaire ................................................................................. 53
2.1.8. Standards, specifications or rules of validation, consistency and imputation ........ 56
2.1.9. Classifications used ............................................................................................... 58
2.2. STATISTICAL DESIGN ..................................................................................................60
2.2.1. Basic components ................................................................................................. 60
2.2.2. Statistical units....................................................................................................... 62
2.2.3. Periods of reference and collection ..................................................................... 63
2.2.4. Sample desing ....................................................................................................... 65
2.3. DESIGN OF EXECUTION ..............................................................................................67
2.3.1. Traninig system ..................................................................................................... 67
2.3.2 Preparatory activities ............................................................................................ 69
2.3.3. Design of instruments........................................................................................... 70
2.3.4. Collection of the information ............................................................................... 71
2.4. SYSTEMS DESIGN ........................................................................................................79
2.5. DESIGN OF THE METHOD AND MECHANISMS FOR QUALITY CONTROL ...............83
2.6. DESIGN OF THE ANALYSIS OF RESULTS ....................................................................91
2.6.1. Statistical analysis.................................................................................................. 91
2.6.2. Context analysis .................................................................................................... 91
2.6.3. Committee of experts ........................................................................................... 91
2.7. DESIGN OF THE DISSEMINATION ..............................................................................92
2.7.1. Administration of the data repository ................................................................. 92
2.7.2. Products and instruments of dissemination ...................................................... 92
2.8. DESIGN OF THE EVALUATION OF QUALITY..............................................................94
3. RELATED DOCUMENTATION ...........................................................................................95
GLOSSARY OF TERMS ……………………………………………………………………………………………96
BIBLIOGRAPHY .....................................................................................................................98
ANNEXES…………………………………………………………………………………………………………….100
FOREWORD
The National Administrative Department of Statistics (DANE), a government agency,
is responsible for coordinating and regulating the National Statistical System (SEN).
Within the Statistical Planning and Harmonization project, it works for strengthening
and consolidating the SEN. The following processes support this commitment: the
production of strategic statistics; the generation, adaptation and dissemination of
standards; the consolidation and harmonization of the statistical information and the
coordination of instruments, actors, initiatives and products, all actions geared
towards the improvement of the quality of strategic statistical information, its
availability, timeliness and accessibility in order to respond to the increasing demand
for such information.
Conscious of the need and obligation to offer the best possible products, DANE has
developed a standard guide for the documentation of the methodologies of statistical
operations so as to contribute to the visualization and understanding of the statistical
process. Through this instrument, the organization produces methodological
documents, for use by specialists and the general public. They present in a standard
manner, the main technical characteristics of the processes of each research. They are
complete, of easy reading, which allows its analysis, control and evaluation.
This series of documents, favors the transparency, confidence and credibility of the
technical quality of the institution for a better understanding and use of the statistical
information produced following the principles of coherence, comparability, integrity
and quality.
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Consumer Price Index (CPI)
General Methodology
INTRODUCTION
From the institutional point of view, the Consumer Price Index (CPI) is a statistical
research for measuring the average percentage variation of the prices of a set of final
goods and services demanded by consumers.
The information of the CPI allows analyzing different situations of economic character
and is used for decision making inside the government and within private institutions.
The resulting index is used mainly as factor of adjustment in the determination of
wages, financial statements and in the solution of labor or fiscal claims.
The CPI is used to calculate the loss of purchasing power of the currency, to establish
the evolution of prices in the commodity flow balances of the national accounts and
as an instrument of analysis of the behavior of the economy.
The first calculations of the CPI were done by Banco de la República (Central Bank)
towards 1923. In the same year the General Comptroller Office was created and took
over, among others, the function of structuring the official statistics. It produced a first
work on price indexes from surveys of expenditures of the working class in Santafé de
Bogotá, in 1937.
Later on other cities were introduced in the surveys: Medellín (May 1938 base),
Bucaramanga (September 1945 base), Barranquilla (October 1946 base) and
Manizales (October 1947 base). Since DANE initiated this type of research in 1954, it
established elements of methodological, conceptual and structural character, that can
be considered as standards and which reflect an institutional effort of permanent
renovation, to offer a statistical exercise as close as possible to the reality of the price
effects on the final consumption expenditure of the Colombian households.
The Decree 3167 (December 26, 1968), explicitly established within DANE’s functions
the elaboration of the CPI: “[…]…It shall establish price indexes for the main goods and
services at the producer, wholesale and consumer level; it shall collect the required
elements and periodically publish the summary of the corresponding results”
(Chapter I, article 2, paragraph J).
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Nacional de Estadística (DANE)
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DANE implements regularly the revision of the CPI with the purpose of incorporating
methodological and operative improvements in order to align the statistical
production of the index with the new developments generated by more advanced
statistical systems. In accordance with the international recommendations and
standards, the CPI must be updated at least every ten years. Following these
standards, in 2008, DANE realized the most recent update of the index for Colombia.
The process of updating the CPI follows closely the following references: the
recommendations, standards and norms (regulatory frame of the statistical
organizations) set by the United Nations, the International Labor Organization (UNOIT), the International Monetary Fund (IMF), as well as the experience of prestigious
statistical institutes with international tradition such as that of Canada, United States
and France, and that of national and international experts in this particular field.
The basic documents used as references regarding the best practices to be followed
in this update were: the Manual of Consumer Price Index “Theory and Practice”, of the
International Labor Organization (ILO), International Monetary Fund, World Bank,
Organization for Cooperation and Economic Development (OCDE), the Data Quality
Assessment Framework for the CPI of the International Monetary Fund, Standard for the
Calculation of a Harmonized CPI for the State Members of the Andean Community and the
EUROSTAT. Good Practices Manual.
The process of revision followed by DANE produced a new version of the index that
includes the update of the household basket and weights for the calculation, as well
as the increase of the geographic coverage of the indicator, using the most recent
National Income and Expenditure Survey, carried out between years 2006-2007.
This document intends to be a practical guide that summarizes the main information
included in the methodologies (thematic, statistical, sampling and elaboration of
indicators) and other documents that are part of the Quality Management System and
of the Documentary System of the Consumer Price Index (CPI) Processes.
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Consumer Price Index (CPI)
General Methodology
1. BACKGROUND
Initial exercises on CPI date back to 1917. Later on, the General Comptroller Office
made some exercises on retail prices. Since 1950, with the strengthening of DANE,
productions of price indices are among its functions, thanks to the recommendations
of the economic missions on the consolidation of the planning system. From 1954,
five revisions have been made including the weighting system, the increase of its
geographic coverage, and the selection of basket of products for the follow-up of prices.
They are presented below:
IPC-20
Basic Survey: households income and expenditure surveys, realized in August 1953
in Bogota, and October 1953 in Medellín, Cali, Barranquilla, Bucaramanga, Manizales
and Pasto.
Base Period and time coverage: Bases: July 1954 - June 1955 = 100; time coverage:
from July 1954 to December 1978.
Index Coverage
a) Geographic: It refers to the population of seven cities: Bogota, Medellín, Cali,
Barranquilla, Bucaramanga, Manizales and Pasto. The criteria used for their
selection were the level of income, the population density, the climate and the
location.
b) Socioeconomic: The households of the included cities were stratified in two major
categories of occupation: those whose head was an employee and those whose
head was a worker.
The following aspects were considered in the socio-economic classification: the type
of occupation of the members of the household determined by the type of work
performed (intellectual or physical), the qualification required for the normal
performance in the position, the functions attached to the position and the standard
of living measured by the conditions of the dwelling.
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Nacional de Estadística (DANE)
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The independent workers, the non-familiar groups and the households including only
adults were excluded from this process of classification.
IPC-40
Basic Survey: the structure of consumption used to establish the weights for the
calculation of the CPI is that observed in the Income and Expenditure Survey (EIG),
carried out on 1970 in the seven main cities of the country, which was considered as
adequate to take into account the evolution of prices from this date to the base
period.
Base Period and time coverage: Base December 1978 = 100; time coverage: from
January of 1979 to December of 1988.
Index coverage:
a) Geographic: the information is representative of the population of seven cities:
Bogota, Medellín, Cali, Barranquilla, Bucaramanga, Manizales and Pasto.
b) Socioeconomic: the unipersonal households, the
collective households (ore
collective living quarters) and the high income households were excluded from
the reference population. The 1970 Income and Expenditure Survey (EGI)
revealed that the consumption structures depended, to a large extent, on the
level of income of the households, more than the occupational categories used
to classify them. This was the reason to change the previous classification of
households between workers and employees for the classification of
households between low and medium income, excluding from the index the
high income households.
IPC-60
Basic Survey: the Income and Expenditure Survey (EGI) realized between March 1984
and February 1985 was the basis for the IPC-60. In this survey, the weekly expenses
were reported on a daily basis by the housewife using the notebook method used for
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Consumer Price Index (CPI)
General Methodology
the first time in DANE researches. The survey included 52 weeks of collection and it
covered fifteen cities.
Base Period and time coverage: Base December 1988 = 100; time coverage: from
January1989 to December 1998.
Index Coverage
a) Geographic: the information is representative of the population of thirteen cities
with its respective metropolitan areas or zones of influence, and contributes to a
greater representativeness of the urban national index with: Bogotá, Medellín,
Cali, Barranquilla, Bucaramanga, Manizales, Pasto, Pereira, Cúcuta, Montería,
Neiva, Cartagena and Villavicencio.
b) Socioeconomic: the reference population was defined as the set of private
households located in the area of thirteen cities. The unipersonal households,
collective homes and high income households were excluded. Considering that
the purchasing power of the homes constitutes a determining variable of the
consumption structure, the IPC-60 continues using two differentiated groups for
low income and medium income households.
Base Period and time coverage: base December 1988 = 100; time coverage: from
January 1989 to December 1998.
IPC-98
Basic Survey: the 1994-1995 Income and Expenditure Survey (EGI), was collected over
the period March 1994 - February 1995. For the construction of the basket the values
of consumption were adjusted taking into account the evolution of relative prices of
goods and services between the survey period and December 1998.
Base Period and time coverage: the base of the index corresponds to the prices
averages of the month of December 1998, that is to say, the base of the index is
December1998 = 100; the time coverage is from: January 1999 to December 2008.
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Nacional de Estadística (DANE)
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Index coverage:
a)
Geographic: it covers the population of 13 capital cities of departments, and
includes some metropolitan areas. The cities with local index are: Bogotá;
Medellín with Bello, Envigado and Itagüí; Cali and Yumbo; Barranquilla and
Soledad; Bucaramanga with Floridablanca and Girón; Manizales and Villa Maria;
Pasto; Pereira and Dosquebradas; Cúcuta and Los Patios, El Zulia and Villa del
Rosario; Cartagena; Montería; Neiva and Villavicencio.
b)
Socioeconomic: the reference population was defined as the set of particular
households in the urban area of thirteen cities; unipersonal households and
collective households were excluded.
The IPC-98 defined three groups
differentiated by income: low, medium and high.
The setting up of the CPI-98 is the revision of the index that has included the largest
number of changes, a reason to consider it as the strongest version in the last years.
The most noticeable modifications are: the change in the dissemination and
production system of the index (including a fixed level and another flexible) that
makes possible a quick update of the basket for the follow-up of prices), the form of
calculation (using geometric ratios) and the use of models for implicit adjustment for
quality.
CPI-08
This is the most recent revision of the index; it includes an update of the households’
basket and of the weights for the calculations weights of calculation, as well as the
increase of geographic coverage of the index. Its base is the more recent Income and
Expenditure survey 2006-2007. It includes in addition a rationalization in the number
of basic expenditures and items for the follow-up of prices.
The technical details of this revision constitute the fundamental body of the
methodology that appears in the rest of this document. In terms of time coverage, it
covers from January 2009 to date.
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Consumer Price Index (CPI)
General Methodology
2. DESIGN OF THE RESEARCH
2.1. THEMATIC DESIGN
2.1.1. Needs of information
The purpose of the CPI is to establish the average monthly percentage variation of the
retail prices of a representative set of goods and services consumed by households. It
makes possible to analyze the economic context and is extremely useful in the
decision making process of the Government and private institutions.
In this sense, the index is used mainly as factor of adjustment in the determination of
wages, financial statements and in the solution of labor or fiscal demands. Also, the
CPI is frequently used to calculate the loss of purchasing power of the currency, in the
commodity flow balances of the national accounts and as an element of analysis of
the behavior of the economy.
2.1.2. Objectives
General objective
To aggregate, obtain and disseminate, on a monthly base, the average variation of
prices of a basket of goods and services, representative of the consumption of the
households, with the purpose of strategically guide the economic analysis and
decision making both of the government and of the private institutions.
Specific objectives
 To measure the average percentage variation of the prices of a selection of goods
and services of household’s final consumption, which is used for the short term
economic analysis.

To collect monthly information in order to perform indexing processes.
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 To determine the sources reporting prices, rates and fees in order to implement
its collection and determine their changes.
 To construct the basket of representative goods and services for the CPI.
2.1.3. Scope
The CPI measures the average percentage variation of the prices of a representative
set of final goods and services consumed by households. It does not calculate the
value of the family shopping basket. The data collection procedure includes 24 cities.
2.1.4 Reference framework
a. Theoretical Framework1
As a part of the design of an indicator that presents the evolution of consumer prices,
it is necessary to decide between the construction of an index of constant utility,
known as Cost of Living Index (COLI) and a fixed basket index. In practice, the fixed
basket indices are considered a good approach to the Cost of Living Indices (COLI).
Cost of Living Index (COLI)
Two different types of utility functions must be taken into account in their
construction; the first one considers each individual as an independent consumer,
whereas the second considers the aggregate of the consumers. Actually, given the
typical statistical instruments (surveys) available, the construction of these two utility
functions becomes difficult.
In a COLI the basket of goods and services must include all those that belong to the
structure of the expenditure of households without exception. This implies that it is
1
The theoretical framework described below is based on the IMF document: Consumer Price Index
Manual. Theory and Practice; 2006. (In particular for concepts as COLI, CPI, Fixed weights, Variable
weights and Fisher Indices).
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Consumer Price Index (CPI)
General Methodology
not possible to apply criteria of selection of the basket from the characteristics of the
goods and services, the forms of acquisition or the mechanisms of payment.
Within the framework of a COLI, the function of demand depends on the prices, the
quantities and the utilities:
COLI = f (Pr, Q, Ui)
Where:
Pr = Prices,
Q = Quantities,
Ui = Utility
Within this framework, the elaboration of a COLI tries to reveal the change required in
the minimum expenditure to acquire a basket of goods and services that maintain the
level of utility or well-being obtained by the consumer, when comparing and analyzing
two periods. This exercise must take also into account that the utility depends on
other variables besides prices, such as fashion or trend, social weights and political
changes. (The households well-being will depend on the physical and social factors in
which they are immersed, a reality that is not included within the concept of price).
Consumer Price Index (CPI)
Actually, the compilation of this type of indicators arises as an alternative that
produces results close to COLI. In this case, a structure of consumers’ preferences is
determined and remains fixed. As a consequence the problem of construction of a
price indicator for the consumer is reduced to the measurement of quantities and
prices.
The structure of preferences used corresponds to the structure observed in the
households’ expenditure and consumption at a given moment in time (this period
might be chosen as the base period or any other current period). In the bibliography
the indices known as of the Lowe type, are those that allow to determine the
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percentage change in the total cost for acquiring a given set of quantities (generally
called basket) between any two periods being compared.
In the case of consumer price indexes, the goods and services included are those for
which it is possible to identify: acquisition prices, brands, qualities and units for the
follow-up of prices; that is to say, they are final consumption goods and services. In
this way the field of application of the research on prices is defined and is
differentiated from the scope considered in the cost of living index.
The success of a fixed basket index depends on representing the actual patterns of
expenditure and consumption of the households when selecting the goods and
services for the basket for the follow-up of prices. The population under study and the
geographic coverage of the exercise are also critical contributors to the good quality
of the results.
The conditions in which the CPI could approach a COLI should guarantee, among
others:
A certain level of utility or well-being.
A certain level of consumer preferences.
A defined state of physical and social environment.
Types of compound indices
Compound Index. There are three possibilities for the calculation formula of
compound indices:
1) A fixed weight index in which the weights correspond to the base period of the
exercise;
2) An index with variable weights corresponding to the current period; and
3) A mix of the first two also called superlative index.
Using compound indices allows to diminish the implicit biases of fixed baskets
consumer prices and to fulfill the objective of the indicator, which is to inform on
the variations of prices that affect the consumer.
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Consumer Price Index (CPI)
General Methodology
Fixed weights Index
Fixed Weights. When two periods of time are considered, a Laspeyres type index
(theoretical designation of a fixed weights index) tries to respond to the question:
Which is the increase or the reduction of the purchase value of a basket of goods and
services, if the quantities of purchase of the first period remain fixed? These fixed
quantities correspond to the pattern of expenditure and consumption of the base
period of the exercise and, therefore, to the structure of preferences demonstrated
by the households. The changes that appear in the value of purchase are supposed
to represent the real variations of prices.
(International Labor Organization- ILO.
Geneva, 2003).
The theory of indices indicates that the Laspeyres type indices may present an
upwards bias as compared with the constant utility indices as they do not take into
account that households may substitute products as they observe changes in relative
prices or in their income level.
Variable weights Indices
Variable Weights. A variable weights index or Paasche type index tries to answer the
question: Which is the increase or the reduction in the value of purchase of a basket
of goods and services if the quantities currently bought had the same prices of the
initial period? In the variable weights indices the structure of weights (and
consequently the structure of preferences of the households) corresponds to the
current period. Thus it is possible to associate the changes in the value of the basket
to real variations of prices. (International Labor Organization- ILO. Geneva, 2003).
The theory of indices indicates that the Paasche type indices may, in opposition to
what happens with the fixed weights indices, present a downwards bias because the
structure of consumption for calculating the variation is the structure of consumption
of the current period, and since this structure reflects the price conditions of the
current period, the estimated variations of prices may be smaller.
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Superlative or ideal Fisher index
The Fisher indices appears as an alternative solution to the biases that may be
introduced by the Laspeyres type or Paasche type indices. In that sense, they
represent an approach to the COLI.
Thus the ideal Fisher index pretends to
incorporate the changes of price suitably reflected by a Laspeyres type index and the
changes in the patterns of consumption introduced into a Paasche index. As the
Fisher type index corrects the previously mentioned biases, they are also known as
superlative or ideal Fisher indices.
Actually, for the construction of the superlative index the information requirements
are greater that in the individual case of the other indices because it is necessary the
previous construction of the Paasche and the Laspeyres indices.
The following tables present a practical example of the calculations made for each of
the previously mentioned indices.
Table 1 presents the structure of expenditure and consumption of two products and
two periods of time 1 and 2. The vectors of quantity are Q1 (period 1) and Q2 (period
2); the vectors of prices (P1 and P2), and finally the values V1 and V2 determined as
the product of prices by quantities.
Table 1. Expenditure and consumption in two periods 1 and 2
Item
Quantity in 1
Price in 1
Value in 1
Quantity in 2
Price in 2
Value in 2
Beef
1,0
1,0
1,0
0,8
1,6
1,28
Chicken
1,0
1,0
1,0
2,0
0,8
1,60
Total
2,0
2,88
Source: Example given in the Boskin Report - US Congress
To develop the Laspeyres type index (Table2), the quantities observed in the first
period remain fixed (Q1), and they are valued according to the prices of the first and
the second period, and two total values of the basket are obtained. Finally, and on the
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Consumer Price Index (CPI)
General Methodology
basis of the changes registered in the total value of the basket between the two
moments, the index value of period 2 as compared to period 1 is 1,20.
Table 2. Laspeyres type Index
Item
Beef
Chicken
Total
Quantity in 1
Price in 1
Value in 1
Quantity in 1
Price in 2
1,0
1,0
1,0
1,0
1,0
1,0
2,0
1,0
1,0
1,6
0,8
Value
estimated 2
1,6
0,8
2,4
Change
1,20
In the case of the development of the Paasche index (Table 3), the quantities used to
value in both periods of time correspond to the structure observed in the second
period (Q2). The index value of period 2 as compared to period 1 is 1, 03.
Table 3. Paasche type index
Item
Beef
Chicken
Total
Quantity in 2
Price in 1
Value in 1
Quantity in 2
Price in 2
0,8
2,0
1,0
1,0
0,8
2,0
2,8
0,8
2,0
1,6
0,8
Value
estimated 2
1,3
1,6
2,9
Change
1,04
Source: Exercise mentioned in the Boskin report - Congress of the United States
The calculation of the superlative or Fisher type index requires using the Laspeyres
and Paasche indices and corresponds to the square root of their product: (CPI Manual
IMF,ILO; OECD; WB,UN, 2006):
ISF = √ITL ∗ ITP
Where:
ISF
=
ITL
=
ITP
=
Fisher Index
Laspeyres
type
Paasche
type
Index
Index
ISF = √1,20 ∗ 1,03
=1,11
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b. Conceptual framework
Laspeyres Index: fixed basket (or fixed weights) price index. This index uses the
basket of goods and services of the base period. The base period is the period of
reference of weights and prices. (Manual of Consumer Price Index: Theory and
Practice, op. cit. p. 517).
Index Number: value that shows the temporal or the space changes of a magnitude.
The important characteristics in the construction of an index number are their
coverage, base period, system of weights and the averaging of observations method.
(OCDE - Data and Metadata Reporting).
Monthly Variation: Percentage change of a month with respect to the previous
month. Such rates are expressed as (Mt/Mt-1) - 1) *100 (Statistical Data and Metadata
Exchange- SDMX; BIS and others 2006, Metadata Common Vocabulary.)
c. Legal Framework
Decree 3167 (December 26, 1968) established as a function of DANE to produce the
CPI: “To establish price indexes at the producer, whole sale and consumer level, of
the main goods and services, to periodically collect the prices and to publish the
summary of the obtained results”.
d. International References
At international level most consumer price indices are designed according to the
Consumer Price Index Manual (op. cit.). It includes the recommendations on the
methodological particularities that affect the calculation of an index, its scope (use),
basic conceptual framework, construction of weights, selection of sources, sample
design and compilation of prices (International Monetary Fund, 2006).
Another reference is the DQAF elaborated by the Department of Statistics of the IMF,
for the evaluation of the quality of the CPI, including its main components: integrity,
rigorous methodological procedures, exactitude, reliability, and utility of the statistics
for the user.
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Consumer Price Index (CPI)
General Methodology
Since 1995, several countries, among them Colombia, have taken the
recommendations on the CPI from the Boskin report (United States) as a reference
because it provides the elements of an in depth evaluation of the operational or
design biases that may be introduced (Boskin, 1996).
The process of design and compilation of the CPI at DANE takes into account the
international recommendations in the mentioned documents, and those derived from
the experiences of Statistics Canada.
e. National References
The CPI follows the National Code of good practices for Official Statistics. (DANE,
2011), which may be consulted in the following link:
http://www.dane.gov.co/files/sen/bp/Codigo_nal_buenas_practicas.pdf
2.1.5. Design of indicators2
The following pages describe the most relevant aspects taken into account in the
construction of weights and in the selection of the basket of products been followed
in the CPI. Since the basic input for this activity is the EIG, this description includes the
filters applied to the information collected through this survey with the purpose of
limiting the results according to the scope of the CPI.
a. Basic information
The basic information to calculate the weights of the CPI and the selection of the
basket for price collection is derived from a specialized survey that DANE applies with
regularity, denominated Income and Expenditure Survey (EIG).
2
The aspects related with the calculation of weights and the basket selection are supported theoretically
on IMF’s Manual: CPI, Theory and Practice (IMF, 2006).
Departamento Administrativo
Nacional de Estadística (DANE)
22
The EIG has been applied by DANE in several periods (1970, 1984-1985, 1994-1995
and most recently in 2006-2007), and allows the construction of the patterns of
expenditure and consumption of the households of the country. It inquires on the
expenditures of each member of the household, their frequency (daily, weekly,
monthly, quarterly, half-yearly and annual), as well as the level of income.
The EIG applied in 2006-2007 also collected information in rural areas, and included
the variable “place of purchase”, incorporating new forms of trade, directly related to
the technological evolution and the strategies of trade: sales by Internet, through
catalog and specialized fairs. The results obtained for this variable in particular are
especially useful in the design and implementation of the collection of prices required
by the CPI, since it provides information on the habits of consumption of the
households and the type of establishment where the acquisition of the goods and
services takes place.
The survey incorporated also the variable “frequency of purchase”, questionnaire 2:
urban and rural, in questionnaire 3: notebook of less frequent expenses; the resulting
data allowed to detect changes in the habits of purchase of the households, related to
the periodicity of purchase of the goods. Additionally, the EIG added questions
identifying the characteristics of the expenditure in food by urban and rural
households3.
b. Generation of weights
The data collected by the EIG demonstrate that there is a certain number of goods
and services typically demanded by an important number of households.
Nevertheless, each household selects a different combination from this set (in terms
of quantities, and frequency of purchase), which determines, for each person, his/her
specific patterns of expenditure or consumption, without limiting the possibility of
generating individual aggregations of patterns, with the purpose of obtaining a
national average or generalized pattern of consumption. This pattern defines the
structure of weights of the expenditure (prices * quantities) and the selection of a
basket of goods and services for monitoring prices.
The basic inputs required for the structural conformation of the CPI are weights
(relative importance) of each item within total households’ expenditure, and the
3
For more details on the EIG survey please refer to the methodological document:
http://www.dane.gov.co/files/investigaciones/fichas/Ingresos_gastos.pdf (EIG Survey 2006-2007)
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Consumer Price Index (CPI)
General Methodology
basket for monitoring prices. With these elements the fixed and flexible structure of
the CPI may be created. Summarizing: it is possible to determine an average
consumption pattern that defines basic consumptions, which combined with the
monthly collection of prices, makes the calculation of the CPI possible.
The CPI is defined as a statistical indicator that measures the average change of the
prices of a representative set of consumption goods and services, acquired by
resident households within the national territory through a monetary expenditure. It
is necessary to determine those articles included within the scope of the research.
Consumption Goods or services: goods or services that the members of the
household use for the satisfaction of their wants and needs. This definition excludes
the investments made by households in financial assets such as shares or bonds, the
purchase of a dwelling, of artworks, gold, or precious stones.
Monetary expenditure: it originates when a household pays using cash, a check, a
debit or credit card, or any other form of financial liabilities. The CPI is limited to
monetary expenditures, because they are observable and can easily by registered.
The CPI excludes those goods or services provided free of charge , donations of
religious or charitable character, as well as the payments of income taxes,
contributions to social security and gratuities because they do not correspond to
purchases of goods and services.
In the case of the licenses, they are excluded because there is no clear relationship
between the payment and the counterpart received by the household in terms of the
service offered with occasion of the supervision, regulation or control by public
entities.
The international reference (IMF, 2006) does not determine a clear position on the
matter and suggests the need of analysis of the particular cases of each country. In
the Colombian CPI the licenses required to own and use land, vehicles including cars,
motorcycles, airplanes and boats for fishing and recreation are classified
conventionally as taxes so that they are excluded from the measurement4.
In the case of insurance, the CPI compilation manual recognizes two types of them:
life and nonlife insurances, where the household makes a unique payment, which
4
In the case of taxes, the payments made by the household does not entitle for a clear counterpart from
the Government, in terms of a service offered with a given frequency, quantities and particular
specifications.
Departamento Administrativo
Nacional de Estadística (DANE)
24
includes the payment for the coverage of the risk and the payment for the insurance
service itself.
Payment for the coverage of the risk: it corresponds to the part of the premium
that is allocated to the common fund that at the end endorses the payment of the
claim, if the risk event occurs. It is known as the net premium. In the case of nonlife
insurance, it is treated as a transfer of resources, because the payment becomes a
contribution to a common fund. In the case of life insurance, the net premium is
viewed as a form of investment. In both cases, the payment for the coverage of risk
should be excluded from the scope of the CPI.
Payment for the insurance service: it is the part of the premium corresponding to
the purchase of the insurance service provided by the insurance companies and their
network. This part of the premium that covers the service must be included within the
CPI.
The international experience has indicated the technical difficulty to efficiently make
the difference between the gross premium and its components:
Gross premium = Net premium + Payment of the insurance service,
It would be ideal to have direct information on the value of the payments of the
insurance services. Because of the lack of information, the CPI takes the value of the
gross premium as a proxy of household’s expenditure in insurance services.
Nowadays the payment of insurance services include: payments for prepaid medical
services, complementary plan of health social insurance services and the premiums
for all risk insurance policies for cars and other vehicles.
Other items excluded from the CPI
The CPI excludes the interest payment that may generate a commercial transaction
on credit. Consumption on own account (nonmarket operations) and generally all
those cases where it is not possible the determination of the price of transaction
associated to a market (operations that do not imply a relation of purchase and sale)
are also excluded.
Housing services expenditure
The household that owns his dwelling receives a service from it. The imputed value of
this service is treated as a nonmonetary expenditure included in the CPI whereas the
expenditure paid by the homes renters is included as a monetary expenditure. It is
important to clarify that the purchase of dwellings is considered as an investment and
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Consumer Price Index (CPI)
General Methodology
as a consequence, is excluded from the CPI. The payment of interest on housing loans
is also excluded.
Weights results
The weights are obtained from the information collected by the EIG in the period
October 2006- September 2007, for a total of 35,998 households (total national
sample). This survey defined the value of the budget dedicated by the households for
the acquisition of each of the goods and services that comprise their final
consumption expenditures. This research includes the expenses according to their
frequencies: daily, weekly, monthly, quarterly and annual.
The construction of the structure of weights by level of income and city is based on
the expenditures collected by the EIG once expanded and transformed to estimate
the annual expenditure. The groups of expenditure by level of income and city that
are added as to find the total weights are derived from the aggregation by functions
of use and nature of the expenditure associated to each good or service. The
expenditure groups are the following:
foods, housing, clothing, health care,
education, recreation, transport, communications, and other expenditure).
The households provided information on their composition, location, age profile and
income, as well as their particular and regular expenses (ex, leasing, expenses in
electricity, gas, etc.), through a detailed description of their day to day expenditure
over an 8 days period5.
The procedures followed in the processing the EIG in a format that fit the
characteristics of the CPI are summarized below:
1. Only the households located in the departments capitals covered by the CPI were
selected (including their metropolitan zones, if relevant). The unipersonal and
collective households were excluded. The application of this filter left a total of
24,808 households.
5
EIG has 4 questionnaires. Nº 2 and Nº 4 are used for collecting the information on day to day
expenditures and personal expenditures. Module C of Questionnaire Nº 2 and Questionnaire Nº 3 are
used for expenditures with frequencies above one week and for less frequent expenditures.
Departamento Administrativo
Nacional de Estadística (DANE)
26
2. The information related to donations made by the households was discarded
(they are not considered expenditure by CPI). The items excluded (as investments
and transfers) have been already described.
3. The records that reported forms of payment different from cash and credit were
left out of the database. Among them those corresponding to consumption for
own final use, payments in work or in goods, barter, exchanges or gifts.
In the specific case of expenditures associated to purchases of vehicles and air tickets,
the construction of weights used complementary sources: for the case of vehicles, the
data produced by Econometría (private organization, specialized in the generation of
information related to this activity); and for air tickets the information on the number
of passengers by route, provided by the Aerocivil6. Finally, the results obtained were
compared with those derived from the 1994 EIG and with those used for determining
the weights in CPI 98.
The EIG collected the information based on the COICOP classification (Classification of
Individual Consumption according to Purpose) that uses as criterion of construction
the origin of the item. Nevertheless the construction of weights and subsequent
selection of the basket required to fit the results within the classification used in CPI,
which is based on levels of affinity among items, following logic of substitution.
The results derived from the calculation of weights for CPI 98, and for CPI 08 (today in
use) are presented in the tables that follow. Table 4 shows the weights of the different
expenditure groups, according to the levels of income and total population in IPC-98.
When this index was constructed eight (8) groups of expenditure were used. It may be
observed that the FOODS group has the greater weight followed by the HOUSING
group.
6
AEROCIVIL is the public institution in charge of controlling and regulating the civil aviation activity in the
country and guaranteeing its organized development. (www.aerocivil.gov.co).
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General Methodology
Table 4. IPC_98. Weights of the expenditure groups, by levels of income
Low income
Medium
income
High income
TOTAL
Food
41,42
30,18
14,70
29,51
Housing
28,31
29,12
31,37
29,41
Clothing
7,29
7,92
5,78
7,31
Health care
4,26
4,06
3,39
3,96
Education
3,57
5,30
4,95
4,81
Entertainment
2,25
3,77
4,69
3,60
7,29
12,17
23,67
13,49
5,60
7,48
11,46
7,89
CPI description
Transportation and
communication
Other expenditure
Source: DANE.
The information collected by the EIG in 2007-2008 led to the weights used in the
present compilation of the CPI (design IPC-08). The differentiation of the expenses on
Transport and Communications modified the number of groups (CPI-08 has nine (9)
expenditure groups), and the weight of the group HOUSING is greater than the weight
for FOODS (See Table 5) for all income groups except the low income one.
Table 5. IPC_08. Weights of the expenditure groups, by levels of income
CPI description
Low income
Medium income
High income TOTAL
Food
34,66
27,09
18,24
28,21
Housing
29,74
30,42
29,66
30,10
Clothing
5,68
5,11
4,20
5,16
Health care
2,04
2,41
3,39
2,43
Education
4,79
5,99
6,83
5,73
Entertainment
2,33
3,19
4,43
3,10
Transportation
11,03
15,32
23,88
15,19
Communications
3,14
3,98
4,03
3,72
Other expenditure
6,59
6,47
5,35
6,35
Source: DANE
Departamento Administrativo
Nacional de Estadística (DANE)
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Levels of income (weights compilation)
The compilation of CPI produces results according to the level of income of the
households. The construction of weights for these levels of income (high, medium and
low), takes into account the behavior of the income observed in the households of
each city. The procedure was to divide the households in three groups, ordering the
sample according to the average income from low to high. The households with low
income correspond to the first 50% of this ordering; the medium income correspond
to the subsequent 45% and finally the high income level corresponds to the upper 5%
group.
The structure of the households’ consumption expenditure by level of income were
analyzed, with the purpose of obtaining their weights.
c. Selection of the basket
Monitoring prices requires the selection of a representative set of goods and services
(basket), by applying general or particular criteria to the information of expenditures
reported by the households.
The criteria of selection of general character that were applied to the goods and
services were:
 To determine characteristics that facilitate the monitoring of prices. These
characteristics include among others, the possibility of identifying a price, a base
unit, sources, as well as the selection of the monitoring specifications in order to
identify the qualities of items. These elements make possible the detection of
“pure price change effect”.

To have a reasonable possibility of permanent availability in the market.
In addition to these general conditions, the following specific criteria in the process of
selection of the basket were applied:
Share in expenditure
This criterion defines which goods and services will be included according to their
share within different levels or subtotals of expenditure (including total
expenditure). The international community accepts different forms for this
criterion: from the historical behavior of weights to the more recent structures of
households’ consumption expenditure.
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General Methodology
The historical analysis of weights uses the income and expenditure surveys
applied in different periods, in order to establish the evolution (gain or loss) of the
relative weight of each expenditure and to decide from this analysis the inclusion
or exclusion of a given item.
It is also possible to apply the item inclusion criterion from a particular point in
time. The date of this cross-section is based on the particularities of each country,
but it is generally selected arbitrarily. By using this variant, it is possible to define
cross-section criteria that might be different according to different levels of
aggregation (subtotals of expenditure), based on the variability of the prices, for
instance: a criterion is defined for the products included in the FOODS group and
a different one for the rest of the basket. The international recommendations
describe as one of the principles of construction of the baskets, to take into
account the share of the expenditure within the sub-groups, but also in lower
categories (class of expenditure and basic expenditure), so as to assure a greater
representativeness of the price effect for each level.
In IPC-08, the application of the cross-section criterion for inclusion within the
basket, led to the inclusion of any good or service representing 5% or more of the
expenditure within its subclass t and 0.01% or more of total expenditure.
Through the application of this criterion, the selected basket represented more
than 90% of the structure of household’s expenditure.
Frequency of demand
It is used as a selection criterion, in particular to determine the forced inclusion of
an item. Most statistical systems do not carry out a frequency analysis of
demand. In the case of the Colombian CPI, since the methodology of the IPC-407,
this parameter of classification has been used, and it is determined as a
percentage of the population. If an item is demanded by more than 30% of the
households, it must be included in the basic basket disregarding its relative
weight in the expenditure.
Analysis of the evolution of the share of expenditure
The analysis of the evolution of the structure of expenditure and consumption by
households based on the information collected in EIG 1994-1995 and 2006-2007
led to the selection of goods and services whose growth in the share of
7
Used by DANE from 1979 to 1988.
Departamento Administrativo
Nacional de Estadística (DANE)
30
expenditure has been important, even if those goods and services were not
initially included in the last EIG using the share of expenditure criterion.
Expectations of growth in the demand for a good or service
This particular criterion leads to the inclusion of products that appear for the first
time in the income and expenditure survey; present a low share of expenditure
and a low frequency of demand but exhibits important expectations of growth in
the short and medium term. Its exclusion would cause a possible rapid outdating
of the basket for monitoring prices.
Composition of the CPI basket (structure)
The system of item classification used by the EIG follows the scheme of the COICOPClassification of Individual Consumption According to Purpose. Its main classification
criterion is based on the origin of the item. During the structuring of the basket,
calculation of weights and exercises of comparison and evolution of the CPI it was
necessary to relate the classification used in CPI with COICOP.
In the system of aggregation of the CPI the selected goods and services are organized
in a way that guarantees that each good or service occupies a unique place and that it
is always possible to obtain the total of a category as a result of the aggregation of
simpler levels, thus:
 Obtaining the Groups of expenditure from the aggregation of sub-groups.
 Obtaining the Sub-groups of expenditure from the aggregation of classes.
 Obtaining the Classes of expenditure from the aggregation of basic expenditures.
 Obtaining the basic expenditure from the aggregation of items or varieties.
The definition of the general structure of the CPI, 1998 revision and 2008 design (IPC-98
and IPC-08); have included the following international recommendations8:
8
The recommendations have been summarized in the CPI Manual (IMF and others, 2006).
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Consumer Price Index (CPI)
General Methodology
General criteria and conditions
The classification of goods and services used corresponds to the classification of
household final consumption expenditure used in National Accounts, specifically the
final uses that they report.
The chosen structure assures the continuity of the statistical information, and
guarantees a level that allows its reasonable use by the users.
The generated structure allows a certain degree of international comparability, at
least with those statistical systems where the social and economic conditions of the
countries make the comparison meaningful.
The selected structure must minimize the biases in the measurement of the price
effect associated with household final consumption expenditure, a type of bias
typically present when consumer price indexes are compiled from fixed baskets.
Particular criteria
Functions of use from the point of view of the consumers have been identified for the
estimation of aggregates.
Substitution and complementarity processes in the expenditure have been identified
for the construction of aggregates.
Components of the new structure of the CPI
From the revision made to the IPC-98, DANE derived the design of a methodologic
variant applicable to price indexes of the Laspeyres type, consisting of identifying two
general levels in the structure, with differences in their characteristics and the form to
be used to update them. These levels consist of a fixed component complemented by
a flexible level, which determines appreciable differences with respect to previous
structures.
Fixed level
This is the part of the index structure that may be updated only with information from
a new household expenditure survey. This implies that during the inter-survey period
the associated weights remain unchanged.
Departamento Administrativo
Nacional de Estadística (DANE)
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The fixed level is characterized as being the part of the structure that will be object of
dissemination and publication, using the traditional framework of a Laspeyres type
index (each level of expenditure has a fixed weight, determined from the EIG data).
In the CPI the fixed level includes four categories. When describing them from the
higher to the smaller level of aggregation we find: 1) group of expenditure, 2) subgroup of expenditure, 3) class of expenditure and 4) basic expenditure.
Group of expenditure: it is the highest level of the structure, the updated version of
the index keeps the concepts and nature of the groups of expenditure of IPC-98. The
only difference consists on the introduction of a new group, resulting from the
division in two groups of “Transport and Communications”.9
Table 6. Structure by groups of expenditure: CPI_98 and CPI_08
CPI_98
CPI_08
1. Food
1. Food
2. Housing
2. Housing
3. Clothing
3. Clothing
4. Health care
4. Health care
5. Education
5. Education
6. Entertainment and culture
6. Entertainment and culture
7. Transportation and communication
7. Transportation
8. Other expenditure
8. Communication
9. Other expenditure
Source : DANE
Sub-group of expenditure: it corresponds to the following level of detail of the
results. (There is a conceptual equivalence between the IPC-98 and the IPC-08).
Table 7 next, shows in comparative form the structure by sub-groups for
CPI-08 and CPI-98:
9
The splitting of the “Transportation and Communication” group is due to the behavior of prices in the
last years for these two services and a clear increase in the expenditure share of “Communication”
according to EIG 2006-2007.
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Consumer Price Index (CPI)
General Methodology
Table 7. Structure by groups of expenditure: CPI_98 and CPI_08
Code
CPI_98
Code
CPI_08
11
Cereals and bakery products
11
Cereals and bakery products
12
Roots and plantain
12
Roots and plantain
13
Vegetables
13
Vegetables
14
Fruits
14
Fruits
15
Meat and meat derivatives
15
Meat and meat derivatives
16
Fish and seafood
16
Fish and seafood
17
Milk, eggs, oils and fats
17
Milk, eggs, oils and fats
18
Other foods
18
Other foods
19
Food away from home
19
Food away from home
21
Housing services
21
Housing services
22
Fuel and utilities
22
Fuel and utilities
23
Household furniture
23
Household furniture
24
Domestic appliances
24
Domestic appliances
25
Other domestic tools
25
Other domestic tools
26
Household textiles
26
Household textiles
27
Household cleaning products
27
Household cleaning products
31
Clothing
31
Clothing
32
Footwear
32
Footwear
33
Clothing and footwear services
33
Clothing and footwear services
42
Health care goods and services
42
Health care goods and services
41
Health care professional services
41
Health care professional services
43
Private insurance expenditure
43
Private insurance expenditure
51
Training and education
51
Training and education
61
Cultural items and related
61
Cultural items and related
62
Recreational equipment
62
Recreational equipment
63
Entertainment and recreational services
63
Entertainment and recreational services
71
Personal transportation
71
Personal transportation
72
Public transportation
72
Public transportation
73
Communication services
81
Communication services
81
Alcoholic beverages and tobacco
91
Alcoholic beverages and tobacco
82
Personal care products and services
92
Personal care products and services
83
Jewelry and other personal items
93
Jewelry and other personal items
84
Other miscellaneous goods and services
94
Other miscellaneous goods and services
Source: DANE
Note: The breakdown of Transportation and Communication Services modified the codes for
the shadowed groups
Departamento Administrativo
Nacional de Estadística (DANE)
34
Class of expenditure: the identification of classes tries to catch the combined price
effect, grouping very similar categories or that may work as substitutes, associating
the purpose.
Basic expenditure: it is the basic level of the structure, and catches a very pure price.
It also corresponds to the lowest level for which fixed weights is established. In some
cases, it can be the direct equivalent of a good or service.
Flexible level
Since version 98, the CPI has a flexible structure. That means that this level may be
modified based on specialized economic and statistical analysis identifying changes in
the revealed patterns of consumption in the monitoring of prices.
This flexibility makes it possible to quote prices on an ampler range of goods and
services, capturing therefore the heterogeneity of the demand between individuals
and regions of the country. It also facilitates a more rapid update of the patterns for
monitoring prices.
Another advantage of using a flexible structure consists in the calculation of geometric
average to calculate simple indices, making explicit the processes of substitution by
consumers between items or between varieties of items. The use of the geometric
averages provides mathematical consistency, since when using paired samples, the
percentage variation between averages of prices, is equal to the average of
percentage variations.
Finally the flexible level allows to capture the price effect that entails the appearance
of a new item, even when there is no associated weight of expenditure in this level
(constructed from the EIG). The incorporation is applied by reweighing the
expenditure among the items already included in the basic expenditure in which the
new good or service could be located.
The flexible level in the new CPI can comprise items or varieties of items, depending
on its relative importance within the consumption expenditure pattern of the
households. The basic expenditure should have the following characteristics:
 Basic expenditure defined by a unique item: this situation requires the
identification, among the basic expenditures, of items, which level of expenditure,
frequency of demand and generalized importance in all the cities that compose
the geographic scope of the index, makes that they deserve this category, among
them: rice, potatoes, bread, milk, cheese, medical consultation, etc.
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Consumer Price Index (CPI)
General Methodology
In these cases, the calculation of the variation of prices concentrates in identifying
varieties of the same product that could constitute a substitution or a
complementarity in terms of expenditure.
 Basic expenditure defined as an aggregate of goods or services: this situation
includes the identification of some elements of the expenditure that do not have
enough importance to constitute a basic expenditure individually; nevertheless
the monitoring of prices of these goods and services is interesting in the short or
medium term. This explain the structuring of basic expenditures by aggregating
goods or services of homogenous characteristics or price behavior.
For the previously described basic expenditures, the variation of prices is
obtained from the average of variations, first by items and then these variations
are added until the level of basic expenditure.
This variant allows capturing the patterns of regional consumption, since it admits
the definition of the generic basic expenditure, nourished from the different items
that make up differentiated patterns of consumption. In this way the adoption of
a homogenous national structure of weights by items might be avoided, and the
adoption of weights according to the regional particularities is made possible.
A similar situation appears respect of the difference in the patterns of
consumption by income levels. In this case, the differences of structure by income
levels are not produced because the goods and services are absolutely dissimilar,
but because the share of expenditure assigned to each of them changes
according to the income level. (What should be expected is that although the
levels of prices of the same goods and services are different, their variations have
the same behavior). The procedure indicates that it is always possible to monitor
prices for different items according to the income level: (low, medium and high),
within the broadly defined basic expenditure.
The composition of the basket designed applying criteria previously defined,
appears in Table 8. The composition determined in design IPC-98 and IPC-08 is
described according to group, sub-group, class of expenditure and basic
expenditure, and the number of items included in each basket.
Departamento Administrativo
Nacional de Estadística (DANE)
36
Table 8. Index structure. Groups, subgroups, classes, basic expenditure and items for CPI_98 and
CPI_08
Structure level
Groups
CPI_08
CPI_98
9
8
Subgroups
34
34
Classes
88
79
Basic expenditures
181
179
Items or varieties
423
408
Source : DANE
Monitoring housing prices
It is generally accepted that the valuation of non-monetary expenditures should be
based on market prices for actually traded similar products. In the case of estimating
the imputed rentals for owner-occupied dwellings in the CPI (), the variation in the
actual rentals is assigned, with the understanding that this is a good approach. This
estimation excludes the inclusion of the expenditure associated with the repair and
maintenance of dwellings in the CPI since these expenditures are inputs for the
production of the imputed rentals.
According to the characteristics of households expenditure observed in the EIG, by
city, the actual rental is based on the variations in the rental of a house, an apartment
or a room. The imputed rentals on the other hand, exclusively include the rentals of
an apartment or a house.
Methodology of calculation of the CPI
The calculation of the CPI by income level has as basic input the prices of goods and
services reported by each source. All the sources of CPI are classified as follows:
a) Sources from retail trade: they provide information on prices for goods and
services, excluding housing rentals, domestic service, housing management
services and public services.
b) Sources on rentals: those sources provide information on dwelling rentals,
domestic services and housing management services.
Bogotá D. C., Cundinamarca
2015
37
Consumer Price Index (CPI)
General Methodology
c) Sources on public services: they provide information on prices of public
utilities: electricity, telephone, water supply, sewage and waste collection
services.
Classification applicable to the sources described as retail trade:
 Large Cities
In the big cities it is possible to classify the sources according to their geographic
location, the characteristics of the establishment and the type of consumers who
shop there:
Group 1 sources. Located in zones of the city with predominance of
socioeconomic strata 1, 2 and 3, that is to say, they are the retail trade businesses
corresponding to those strata located in their area of influence.
Group 2 sources. Located in zones of the city with predominance of
socioeconomic strata 4, 5 and 6, that is to say, they are the retail trade businesses
corresponding to those strata located in their area of influence.
Group 3 sources. Located in the commercial zones of the cities, that is to say,
without predominance of any socioeconomic stratum or residential use, they are
the places where all the socioeconomic strata are supposed to shop.
 Small Cities
The small cities have a single commercial zone located in the city center; all the retail
trade establishments have been assigned to the Group 3 source.
The classification by source group defines the level of income to which the prices
collected will be assigned as follows:
Sources group 1 and 3 participate in the calculation of the low income level.
Sources group 2 and 3 participate in the calculation of the medium income level.
Sources group 2 participate in the calculation of the high income level.
For the case of the sources of rentals and public services the criterion applied differs,
since the determination of the group refers the possible stratification:
Group 1 sources. Concern strata 1 and 2. (They influence the calculation of low
income level)
Departamento Administrativo
Nacional de Estadística (DANE)
38
Group 2 sources. Concern strata 3 and 4. (They influence the calculation of medium
income level)
Group 3 sources. Concern strata 5 and 6. (They influence the calculation of high
income level)
The calculation of the CPI is based on price relatives by source from which it is
possible to obtain, using geometric averages, the average variation of the price
relative for each item according to the level of income. In a further stage, the weighted
arithmetic average is used in the construction of the indices for the basic expenditure
by income levels and total. The aggregation using the arithmetic average allows to
obtain the rest of indices of the structure. The calculation of the total CPI by city or at
national level is based on the calculation of the indices by income level.
Figure 1 presents the general scheme that defines the calculation of the CPI: in each
city there is a flexible level, which aggregation generates the basic expenditures,
classes, sub-groups, groups and a total for this city. The aggregation of the 24 cities
included makes it possible to compile the 24 cities total.
Figure 2 summarizes the impact of the collection of prices in each type of commercial
source within the calculation of the CPI. The information of all those that impact the
low level of income (sources type 1 and 3), make it possible to calculate the basic
expenses, classes, sub-groups and groups of that level, whereas the information of
sources type 2, impact exclusively the high income level. The calculations
corresponding to the average level of income, on the other hand, includes the sources
type 2 and 3. The aggregation of all the resulting indices by income levels (according
to the expenditure aggregation), leads to the total index by income levels, for basic
expenditure, classes of expenditure, sub-groups and groups.
Bogotá D. C., Cundinamarca
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Consumer Price Index (CPI)
General Methodology
Figure 1. General scheme for Indices compilation, by level of income for each city
Figure 1. General scheme for Indices compilation, by level of income for each city.
Country
Total
City 1
City 24
Flexible
level
Flexible
level
Basic
Expenditure
Basic
Expenditure
Basic
Expenditure
Class
Class
Class
Sub-group
Sub-group
Sub-group
Group
Group
Group
CPI-City 1
CPI-City 24
CPI-Country
Total
Source : DANE
Source : DANE
Departamento Administrativo
Nacional de Estadística (DANE)
40
Figure 2. Calculation Scheme
Figure 2. Calculation scheme by source group (commercial)
Indices compilation scheme
F
L
E
X
I
B
L
E
S
T
R
U
C
T
U
R
E
Source 1
Source 3
Low income
Source 2
Middle
Income
Higher income
Total
Income
Expenditure B
Low Income
Expenditure B
Middle
Expenditure B
Higher Income
Total
Expenditure B
F
I
X
E
D
S
T
R
U
C
T
U
R
E
Class G
Low income
Class G
Middle
Class G
Higher Income
Total
Class G
Subgroup G
Low income
Subgroup G
Middle
Subgroup G
Higher Income
Total
Subgroup G
Group G
Low income
Group G
Middle
Group G
Higher Income
Total
Group G
Total
Low income
Total
Middle
Total
Higher Income
Total
City
Source : DANE
Procedure of calculation
The procedure of calculation of the CPI, starting from the simplest level to the total is
described in the following paragraphs:
 Simple Relative indices by source: it represents the simple relative value of the
behavior of prices for a given specification in a source (variation of the price of an
item in a specific source). Its objective is to determine the behavior of the prices
Bogotá D. C., Cundinamarca
2015
41
Consumer Price Index (CPI)
General Methodology
for an item or variety between two periods of time, referring to a same base unit
for the same source. The calculation form is:
IRS = (Pt / P t-1)
Where:
IRS = Simple Relative index by source
Pt
= Price in the current period
Pt-1 = Price in the previous period
The source of information for the construction of the IRS is the Unique Collection
Form (FUR), in physical and magnetic format, which is consolidated in the database.
 Geometric Average of simple relative indices by source: it corresponds to the
first calculated aggregation, determined by the geometric average of simple
relative indices by source for each item or variety; it shows the average behavior
of the prices, for an item or variety, within the sources that provide information
on it. The calculation form is:
PGISR = n√ISR1 ∗ … ∗ ISR n
Where:
PGISR=Geometric
average
of
simple
indices
for
an
item
or
variety
ISR= simple relative index by source
n = number of sources that provide the price for an item or variety
Weighted arithmetic average of geometric averages of simple relative
indices: the weights assigned to each level of expenditure are used. Each item or
variety, determines the average behavior of the variation of the prices.
Departamento Administrativo
Nacional de Estadística (DANE)
42
This calculation allows to update the index of the basic expenditure of the
previous period. The calculation formula is:
IPAGB =
∑ α∗PGISR
∑α
Where:
IPAGB= Weighted Arithmetic Average of geometric averages of simple relative
indices
PGISR= Geometric average of simple indices for an item or variety
a = Weigh of each item or variety referred to its basic expenditure
 Index of local basic expenditure: it represents the index for the first level of the
fixed part of the CPI. Its objective is to determine the level of the index of each
basic expenditure in the period of reference as a result of chaining the index of
the previous period with the weighted arithmetic average of the geometric
averages of simple relative indices for the basic expenditure. The calculation
formula is:
IGB t = IGB t-1 * IPAGB
Where:
IGB t-1 = index of basic expenditure for the immediately previous month.
IPAGB = Weighted arithmetic average of the geometric averages of simple relative
indices for the basic expenditure
 Index of total basic expenditure: it represents the index for the first level of the
fixed part of the CPI for the aggregate of cities and for each city (adding income
levels). Its objective is to determine the level of the index of total basic
expenditure in the period of reference as a result of a double- weighted average
of the level of the indices of expenditure by income levels. The formula is:
Bogotá D. C., Cundinamarca
2015
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Consumer Price Index (CPI)
General Methodology
IGBT =
∑ ∅ ∗ β ∗ IGB
∑∅ ∗ β
Where:
IGBT= index of total basic expenditure
IGB = index of basic expenditure by income levels
Ø = weight of the level of national or local income in the national total
 = weight of the basic expenditures in the income level of the city
 Index of expenditure class: the index of expenditure class represents the index
for the second level of the fixed part of the CPI. Its objective is to determine the
level of the index of the expenditure class in the period of reference as the result
of a weighted arithmetic average of the level of the indices of the basic
expenditure
that
form
each
class
IGC =
of
expenditure.
The
formula
is:
∑ β ∗ IGB
∑β
Where:
ICG = index of expenditure class
IGBT = index of basic cost
 = weight of the basic expenditures
 Index of expenditure subgroup: the expenditure sub-group represents the
index for the third level of the fixed part of the CPI. The calculation formula is:
ISG =
∑ β ∗ ICG
∑β
Where:
ISG = index of expenditure sub-group
Departamento Administrativo
Nacional de Estadística (DANE)
44
ICG = index of expenditure class
= weight of the expenditure class
 Index of expenditure group: the expenditure group represents the index for
the
fourth
level
of
the
fixed
part
IGG =
of
the
CPI.
The
formula
is:
∑ β ∗ ISG
∑β
Where:
IGG = index of expenditure group
ISG = index of expenditure sub-group
 = weight of the expenditure sub-group
 Total index as average of the expenditure groups: represents the index for the
total CPI, as an average of the expenditure groups. The formula is:
ITG =
∑ β ∗ IGG
∑β
Where:
ITG = total index of expenditure groups
IGG = index of the expenditure group
 = weight of the expenditure group
 Total index as average of basic expenditures: it represents the index for the
total CPI, as an average of basic expenditures. The formula is:
ITG =
∑ β ∗ IGB
∑β
Where:
Bogotá D. C., Cundinamarca
2015
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Consumer Price Index (CPI)
General Methodology
ITG = total index of expenditure groups
IGB = index of basic expenditure
 = weight of the basic expenditure
Methodology of calculation applied for certain items of the CPI
There are particular calculations applied to certain items of the basket for
monitoring prices. The form of calculation for each item is described as follows:
Vehicles. The calculation is performed through a model by components that defines
the quality of the item based on its technical characteristics. It requires the
identification of the more important parts and characteristics of the vehicle and the
changes that appear. (Within the analyzed components are the brand and model of
the vehicle, the supplied characteristics of performance of the motor, conditions of
the braking and injection subsystems and the variables associated with the size of the
vehicle as well as the accessories).
Computers. The calculation is performed using a hedonic model developed by
Statistics Canada and applied in Colombia considering that the technological goods
have a global market, meaning that the variations determined by the technological
innovations modify in a similar way the quality offered in the goods.
A hedonic model makes it possible to have parameters that define how similar or not
(possibility of substitution) may be two specifications of computers, admitting that
due to the technological innovation it is not likely that two computers be exactly equal
in two periods of time.
The model requires as input information, the data on RAM, the capacity of
the hard disk and the speed of processing, assigning a maximum coefficient of
variation to accept that two computers may be qualified as substitutes.
Lotteries. The collection of data and the analysis of the item lotteries require
information on the price of the tickets, the number of tickets (and fractions of them)
offered to the public and the associated prize. The analysis of the price
has to consider the probability of winning and the value of the prize.
The analysis of the information incorporates the three above mentioned elements:
price of the ticket (or fraction); probability of winning and amount of the winnings, in
order to determine the price that affects the public. An increase of the winnings, a
Departamento Administrativo
Nacional de Estadística (DANE)
46
decrease in the number of tickets supplied by drawing10 or a reduction in the price of
tickets, imply a real decrease of the price of the lottery; whereas decreasing the value
of the prize, increasing the number of tickets supplied by drawing, or increasing the
value of the ticket (fraction), increase the final price of the lottery. The individual and
aggregate analysis of the three components determine the effect of the price for this
item within the calculation. Nevertheless, the behavior of the sale price of the ticket
(fraction) is a fundamental element to be considered within the variation, since it is
the effect with greater incidence in the public.
The collection of data on lotteries takes place in all the cities that have this service.
Nevertheless, given the participation that certain particular brands have in the market
of other cities, an item “national lottery” is constructed. It adds the variation of the
lotteries with national presence (extending its local market). The identification of the
lotteries with national market and its relative weight with respect to the local lotteries
is part of the updating process of the flexible level of the collection basket.
Insurances (all risk policies for vehicles). Due to the difficulties in the determination
of the payment for the insurance service, and its differentiation with respect to the
gross premium, the monitoring of prices of insurance is defined by this value.
In the case of all risk insurances for vehicles, data are collected in the main
and greater capital cities. Each has observations and price relatives that affect their
zone of influence.
Soccer. Soccer is included within the basic expenditure of the item “Entertainment
and recreation related services”. The price of the entry tickets to the matches of the
official tournaments is monitored.
The definition of the proportion of households attending the stadiums includes the
professional teams of the tournament a reach a minimum average number of
assistants per year. For tournament B, the teams that are included are those for which
the average number of attendants surpasses the minimum number reported by the
teams of tournament A.
The calculations take into account the proportion of assistants to one or other team
(in the cases of cities that have more than one team), as well as the reports on
10
A reduction in the number of issued fractions or tickets increases the probability of winning and
implies a reduction in the price; the increase of the number of issued fractions or tickets reduces the
probability of winning and implies a net price increase; there is an inverse relationship between these
two variables.
Bogotá D. C., Cundinamarca
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Consumer Price Index (CPI)
General Methodology
average number of assistants according to the categories of seats in the stadium, with
the purpose of establishing the changes observed among those categories.
The price changes are calculated on a monthly basis by comparing the price
corresponding to the period of reference, with the price of the immediately previous
month, taking care that the structure of assistants (category of places), be
comparable.
Public Utilities. The calculation of public utilities (electricity, water supply,
sewage system, refuse collection, domiciliary gas and telephone) requires the prices
practiced in each of the socio-economic strata (incorporating the particular
treatments for subsidies or contributions); as well as the average consumption of
households and the number of users.
The definition of the price for the calculation of the simple relative index initiates with
the establishment of the value of the average invoice corresponding to the
households belonging to each strata:
Average Invoice Value by stratum= Fixed charge11+ (Price per consumed unit *
monthly average households consumption by stratum)
It is important to mention that when the price per consumed unit is structured in
price bands (for example, when “sumptuary” consumptions are introduced, which
price is higher); the calculation of the average value of the invoice by stratum
includes this differential and the average consumption reported by the service
enterprises monthly.
In order to calculate the public utilities by income level, the average values of the
invoices by stratum are added, using a weighted arithmetic mean, in which the weight
of each stratum is based on the number of users.
2.1.6. Planning of results
The results of the CPI are published monthly in a technical bulletin, a press release,
annexes in Excel and a presentation that describes the results for the national total
and by cities. A dynamic consultation procedure is also available, by which the users
have access to historical series that they can control using different variables such as
city, income level, group, sub-group, and basic expenditures as well as different types
11
This value may be conditioned by contributions and subsidies depending on the stratum.
Departamento Administrativo
Nacional de Estadística (DANE)
48
of indicators: index, change, contribution and share (monthly, current year and last 12
months).
Indicators for dissemination
The following paragraphs describe the indicators generated by the CPI (monthly) and
the mechanisms that make it possible to link series of indices.
The main indicator generated by the CPI is the index. Nevertheless, the research also
provides changes, contributions and shares (monthly, current year and last 12
months).
Changes
 A monthly change is the ratio of the index in the month of reference to the index
of the previous month, less 1 in percentage terms.
VM = (
Index in the month of reference
− 1) ∗ 100
Index in the previous month
Where VM is the monthly change
 Change in current year is the ratio of the index of the month of reference with the
index of December of the previous year, less 1 in percent terms.
Index in the month of reference
VAC = (
− 1) ∗ 100
Index in December of the previous year
Where VAC is the change in the current year
 Change in the last twelve months is the ratio of the index in the month of
reference with the index of the same month of the previous year, less 1 in percent
terms.
Bogotá D. C., Cundinamarca
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Consumer Price Index (CPI)
General Methodology
Index of the month of reference
V12M = (Index of the sane month one year before − 1) ∗ 100
Where V12MA is the change in the last twelve months
Contributions
A contribution measures how much each hierarchic level in the classification (group;
sub-group, class and basic expenditure) contributes to the monthly, current year or
last twelve months changes of the CPI.
 Monthly contribution
CM = (
Ia,last month
) ∗ Pa ∗ VMa /100
ITN,last month
For example, the monthly variation of the CPI was 1.50% in June of 2009, and
the contribution of the basic expenditure “rice” was 0.25 percentage points. This
means that the basic expenditure “rice” contributed 0.25 percentage points to the
total variation of 1.50%. (It is possible to find negative contributions to the
variation).
 Current year contribution:
Ia,December last year
CAC = (I
TN,December last year
) ∗ Pa ∗ VACa /100
 Last twelve months contribution:
Ia,same month a year ago
C12M = (Index
TN,same month a year ago
) ∗ Pa ∗ V12Ma /100
Departamento Administrativo
Nacional de Estadística (DANE)
50
Where:
a = hierarchic level
I = index of the hierarchic level
TN = total national
P = consideration of the hierarchic level
VM = monthly variation of the hierarchic level
VAC = variation current year of the hierarchic level
V12M = variation twelve months of the hierarchic level
Share
It is the percentage of the contribution of each hierarchical level (basic, class, subgroup and group) expenditure to the variation of the total index.
 Monthly Share:
CMhierarchical level
PM = (
) ∗ 100
Monthly variation
Assume that the monthly variation of the CPI was 1.50% in June of 2009, and that
the share of the basic expenditure rice was 15.00%. This means that the basic
expenditure “rice” participate with 15.00% in the total variation of the CPI (It is
possible to find negative shares, constructed from variations that indicate losses
in prices).

Current year share:
CAChierarchical level
PAC = (
) ∗ 100
Current year variation
 Participation last 12 months:
Bogotá D. C., Cundinamarca
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Consumer Price Index (CPI)
General Methodology
C12M
hierarchical level
P12M = (Last twelve
) ∗ 100
months variation
Linking Methodology
This paragraph has the purpose of offering to the users the necessary tools to link the
series of the IPC-08 with the old base IPC-98.
The connection procedure, also known as base change, is obtained following the
“fixed ratio method”. The fixed ratio is given by the indices for the same period of
time.
Examples
a. How to obtain the value of the index for January 2009 in base 98?
Data available:
Index December 2008 published in base 98 = 191,63
Index January 2009, published in base 08 = 100,59
January 09
CPIBase 98
=
December 08
CPIBase
98
December 08
CPIBase
08
January 09
∗ CPIBase 08
=
(191,63 ∗ 100,59)
= 192,76
100
b. How to obtain the value of the index November 2008 in base 08?
Index November 2008 published in base 98 = 190,78
Nov 08
December 08
CPIBase
CPIBase
08
08
Nov 08 =
December
CPIBase 98
CPIBase 98 08
Therefore
Departamento Administrativo
Nacional de Estadística (DANE)
52
Nov 08
CPIBase
98 =
December 08
CPIBase
08
December 08
CPIBase
98
Nov 08
∗ CPIBase
98 =
(190,78 ∗ 100)
∗ 190.78 = 99,56
191,63
The process turns out to be reiterative in each of the indices to link. It is necessary to
modify the period of reference considering that the variations should not depend on
the linking procedures.
An alternative method consists in obtaining a “linking coefficient”, calculated as
the ratio of the last index of previous base (in this case, CPI December 2008 base
1998=191.63) and the first index of the new base (in this case, CPI December 2008
base 2008= 100.00. The coefficient can multiply each index of the new base
to find the linked series. The results obtained by this alternative method are
equal to the exposed ones previously.
2.1.6.1. Output tables design
The output tables published by the CPI, correspond to the different possible
groupings defined: geographic (total and for each city); thematic discrimination
(income group: total, low, medium and high); level of aggregation in the expenditure
classification (total, group, sub-group, class and basic expenditure); required indicator
(index, change, contribution and share); and period of reference (monthly, current
year and last 12 months). For better information, the contents of each predefined
table may be consulted in Annex 1.
2.1.7. Design of the questionnaire
For the collection of prices of the basket of goods and services of IPC (IPC-98),
a Unique Collection Form (FUR) was designed; during the first years it was completed
on physical support. In August 2004, DANE implemented the use of Mobile Capture
Devices (DMC) to directly capture the prices in the visited sources. At the moment the
DMC are the regular tool for the collection of information harvesting of information is
used, except in high risk zones. The design of the FUR is kept within the applicative
SatForms installed in the DMC.
Next the used physical form in CPI appears (Figure 3).
Bogotá D. C., Cundinamarca
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Consumer Price Index (CPI)
General Methodology
First module
Includes the logo of DANE and the identification of the research: Consumer Price
Index (CPI)-24 cities. In the physical form the law of statistical reserve is enunciated,
to inform the informant sources on the confidentiality with which the information is
treated by DANE. Also it includes the number of page and the total of pages that must
be generated by source (page__ of ___).
Figure 3. Unique form of collection
Source: DANE
Second module
In the second segment (city) appears the city code (From the Political- Administrative
Classification of the Country- DIVIPOLA and the name of the city).
The third segment includes the source code (sector, section, and block, zone of
assignment, group and consecutive number of the source). See Table 9.
Table 9. Structure of the coding system for the sources
Field description
Length
Initial position
Final position
Department code
2
1
2
Municipality code
3
3
5
Sector number
4
6
9
Section number
2
10
11
Block number
2
12
13
Group code
1
14
14
Class code
2
15
16
Source consecutive number
4
17
20
Total
20
Source : DANE
Departamento Administrativo
Nacional de Estadística (DANE)
54
In the second module are also included:

Name or trade name of the establishment

Address of the establishment

Telephone numbers of the establishment

Name of the informant

Previous Code. (If a previous code existed that identified the source)

E-mail

Fax
The second module includes Section four (4-PERIOD). Period of reference for the
information. The year (four digits), the month (two digits): January 01; February 02,
etc.:
Finally there is a box with information on items previously reported by the source,
with the purpose of controlling the number of articles to collect.
Questionnare body
Element
Nr
Name
Contents
5
CODE
Item code (7 digits) group, subgroup, class and basic expenditure.
6
NAME-SPECIF.
Item name with details of specification. These are particular to each
source: trademark, variety, model, etc.
7
BASE UNIT
Quantity and measure unit that the system uses as price reference.
The systen converts price to this unit when the quantity reported
corresponds to other unit.
8
LAST UNIT
Measure unit or quantity used in a former collection.
9
LAST PRICE
Price reported in the previous collection (without conversion). It is a
cash price including VAT on the item.
10
11
NEW INPUT
An X indicates that the item has the feature of new input
WAITING PERIOD
An X indicates that the item has the feature of waiting period
IMMEDIATE
REPLACEMENT
An X indicates that the immediate replacement of the item has been
made.
12
Bogotá D. C., Cundinamarca
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Consumer Price Index (CPI)
General Methodology
Element
Nr
Contents
Name
13
COMPLEMENTARY
SOURCE
Completed with an X only if the information originates in a
complementary source.Element 17must be completed.
14
CHANGE OF
REFERENCE
An X indicates that the item has the feature of change of reference.
15
16
17
18
19
INPUT OUT
QUANTITY
REPORTED
An X indicates that the item has the feature of input out.
CURRENT PRICE
NOTES. New issues
during collection
This is a cash price and includes de VAT on the item.
COMPLEMENTARY
SOURCE
Includes NAME , ADDRESS, TELEPHONE if a complementary source has
been used.
DATE OF
COLLECTION
DD/MM/YYYY
Quantity reported for the item.
Normally uses a code of a precodified listing. If not, it is described in
the field provided in the MCD.
See foot-note12.
The fields to indicate the responsibility of the collector, the supervisor and the
informant have to be completed by each of them. (For the case of the MCD, the
system defines the person in charge from the profile corresponding to the access
key). When using the paper form, the collector and supervisor must write down their
names and include their signature, and ask for the signature and/or seal of the
informant. (In the case of MCD, the informant data will be taken from the report of
visited sources by city, zone and source).
2.1.8. Standards, specifications or rules of validation, consistency and imputation
Consistency and basic validation of the information are realized by the DMC according
to the incorporated requirements in the specifications of validation and consistency.
12
The specification used for describing the product (section 6) may change depending of the item
reported: the characteristics that define a service are different from those uses for defining a good, for
instance the trademark or the reference.
Departamento Administrativo
Nacional de Estadística (DANE)
56
Information as consecutive number, city code, code and name of the source, year and
month of collection must be within the format. It is always possible that the fields
used to define the new technical new features are not completed (when there are
situations that do not justify the inclusion of a new feature).
In the validation specifications the name of the variable, field, description, values that
may have and the observation with respect to its completion are included. (Annex 2).
Imputation processes
Imputation tries to grasp the price effect that must reflect the indicator when the
collector faces the temporary absence of an article or variety. The technical new
feature waiting period identifies those articles for which it is impossible to locate
price and specifications, and requires the assignment of a “ waiting period” for that
item (brand, reference), to be again in the market.
Design of processing and imputation methods
The imputation procedure begins with the field observation of the temporary absence
of the specification (variety) in the source that is being visited. In that case, a “waiting
period” (PE) in the DMC or the physical form is registered as a technical feature.
The imputation process is done with all the information collected for the month, in the
city and level of income corresponding to the item. The procedure initiates with the
grouping of the sources, according to the group source that corresponds to it: group
1, 2 or 3.
A program calculates the geometric average of relatives by source for each item or
variety, for the city and corresponding source group:
PGR =
Pt
Pt
∗ …∗
√
Pt−1
Pt−1
n−1
Where:
PGR = Geometric average relative
Pt = current price
Pt-1 = previous price
n = number of quotes collected
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The variation obtained is applied to the previous price of articles marked with period
in delay, accepting that average variation of the market must approach the variation
generated for a source in particular, if the article were available for supply:
Current price = Previous Price * Relative Geometric Average
the imputation mechanism does not alter the variation average observed of the
totality of sources (after incorporating the quotes described with period in delay),
which implies that the execution of the procedure is innocuous for effects of the
calculation of the average variation prices, but allows to maintain the sources/items
that experience a temporary absence of the specification (brand/reference). Given the
rules of application of the new feature it cannot be consecutively applied and the total
number of records with this newness cannot surpass 5% of the total of quotes for a
specific item.
2.1.9. Classifications used
The classification of goods and services included in the CPI research is based on the
structure used by National Accounts and on the classification that was used in the IPC60 and the IPC-98. It is important to mention that the used classification maintains
the lineaments of the classification of the individual consumption by purposes
(Classification of Individual Consumption by Purpose) - (COICOP) of the United
Nations.
The IPC−08, describes nine groups of expenditure (obtained splitting the group
“Transport and communications”, used in IPC-98). Annex 3 describes the classification
structure by the groups, sub-groups, classes of expenditure and basic expenditure.
On the other hand, the index codifies the cities according to the DIVIPOLA. This
structure of classification allows to maintain the historical continuity of the
information of the research.
For operative reasons the CPI classifies their sources of information in agreement with
the characteristics of the goods and services that they supply. After they describe the
classes of applicable sources in the index:
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Table 10. Classes of sources
Code
1
Description of the class of source
Market-places, street markets
2
Supermarkets
3
Cooperative and social allowance funds supermarkets
4
Proximity (neighbourhood) markets
5
Specialized stores
6
Pharmacies and perfumer's shops
7
Specialized services establishments
8
Restaurants and chain food services
9
Rented housing
10
Hypermarkets
18
Official (public) educational establishments
19
Private schools (Controlled regime)*
20
Private schools (Free supervised regime)
21
Private schools (Free regulated regime)
Source : DANE
* The controlled and free (supervised and regulated) regimes refer to the payments at the charge of the student. Law
115 (1994) Decree 2253 (1995)
Also, the new technical features are codified within the base, as follows:
Normal report13.
CR = Change of reference. Used when the collected variety presents differences in its
quality and it is not possible to compare the prices.
IS = Immediate Substitution. Used when the collected variety presents small changes
with respect to the observed in the previous period, which allows to compare the
prices
PE = Waiting period. Indicates the temporary absence of the item in the source.
IS = Input (quote) out. Used when the source does not sell the item.
IN = Input (quote) new. Used when a new item or specification is included.
13
The quote of price is collected normally. It does not require particular indication in the database.
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2.2. STATISTICAL DESIGN
2.2.1. Basic components
Universe
Constituted by all the establishments where the consumer goes to acquire goods or
services for final consumption. It includes: retail trade establishments, real estate
agencies or informal services of dwellings rentals, schools, higher education
institutions, public services companies, health care institutions, etc.
For the specific case of education, the universe is constituted by the official and nonofficial schools that offer education at pre-school, primary, secondary and
intermediate levels, besides the educational establishments for formal higher
education and those devoted to non-formal education.
With the purpose of observing the variation of prices for dwellings rented and the
owner occupied dwellings, the information is collected starting from the universe of
all the rented dwellings existing in the 24 cities covered by the CPI.
Objective population
Corresponds to all the establishments in which the consumer acquires goods or
services for final consumption. It includes retail trade establishments, real estate
agencies or informal services of dwellings rentals, schools, higher education
institutions, public services companies, etc.
Statistical Framework
CPI uses a probabilistic design in the development of the collection of information for
some items included in the groups of Education and Housing. For the rest of the
basket, the selection of sources is generated from non-probabilistic methods due to
the complexity to locate up-date and complete frameworks allowing the selection of
sources.
The frameworks used for items related to Education are the Directory of Schools
(2006) and the Directory of Institutions for Higher Education (2007). For the case of
collecting dwelling rentals, the framework corresponds to the geographic base by
blocks, based on the General Census (2005).
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Variables Definition
The variables included considered in the CPI are:
 Classification variables: City; level of income; group; sub-group: class and basic
expenditure.
 Variable of analysis : Prices
 Calculated variables: Geometric average of relative of prices and weighted
arithmetic average.
Sources of data
In the collection of prices of the items of the basket (except those associated to
education expenditures, collected in schools and institutions of higher education, and
the dwelling rentals) the selection of sources is generated from the expert criteria of
the logistics personnel present in each one of the cities and is verified according to the
geo-referenced information.
The selection of sources must follow a minimum of inclusion criteria: the source
enjoys an excellent affluence of buyers, has a large variety of items for retail sale and
offers real possibilities of permanence in the market, so that it makes possible the
regular follow-up of prices. The selection criteria are focused on representing the
different places where the consumers acquire their goods and services.
Geographic coverage
CPI collects information in 24 capital cities of department, including the metropolitan
areas for some of them. They concentrate an important part of the population of the
country and represent a predominant economical and demographical dynamics.
There are some items which prices are formed in a single city (typically Bogotá), for
example mobile telephony, of long distance telephone service or newspapers with
national circulation. In these cases, the items are marked as “national conformation”,
to imply that the prices are collected exclusively in Bogotá although the impact of the
change in the prices reaches the rest of the country.
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For the case of other items as the insurance “all risk” for vehicles, the collection is
made in certain cities that compile the variations that finally reach their zone of
influence (“regional conformation”).
Geographic breakdown
The CPI publishes results for 24 capital cities of department, and some metropolitan
areas that correspond to the municipalities covered.
The cities and metropolitan areas are: Bogotá; Medellín, Bello, Envigado and Itagüí;
Cali and Yumbo; Barranquilla and Soledad; Bucaramanga and Floridablanca;
Piedecuesta and Girón; Manizales and Villa María; Pasto; Pereira and Dosquebradas;
Cúcuta, Los Patios, El Zulia and Villa of Rosario; Montería; Neiva; Cartagena;
Villavicencio; Riohacha; Armenia; Quibdó; Sincelejo; Valledupar; Popayán; Ibagué; San
Andrés; Santa Marta; Tunja and Florencia.
Thematic breakdown
CPI generates results according to the level of income: low, medium and high for each
one of the 24 cities included and the total. The information is available for each level
of expenditure: group, sub-group, class and basic cost.
2.2.2. Statistical units
Unit of observation
The establishments where the consumer acquires final goods and services.
Unit of analysis
It corresponds to the items included in the basket even though the publication
requires the aggregation of items in the construction of the first fixed level (basic
expenditure).
Unit of sampling
The establishments where the consumer acquires final goods and services.
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2.2.3. Periods of reference and collection
Period of reference
The investigation uses as period of reference the previous month.
Period of collection
The collection frequency related to the frequency of modification of prices. This was
the reason for defining a group of frequencies: open, monthly, bimonthly, quarterly,
four-month, semester and annual. This regularity guides the frequency for collection.
Regularity category “open” refers to the fact that collection must be executed at the
moment in which prices modify. It has been observed that prices may change at any
time of the month, it is necessary to realize a special follow-up throughout the period
in such a way that the changes may be detected in any day of the month.
For all the items and in all the periodicities, the selected sample must be distributed
uniformly over the days (months), taking into account the characteristics of each
source: its group and class.
Table 11 describes the periodicities associated with each item group. In clothing, for
example, it is observed that the collection periodicity is quarterly. This implies that 1/3 of
the sources must be collected every month of the year, assuring that for the month of
reference it includes the movement of prices of the sources to be collected in this period.
Thus, the sources visited in month 1, will be collected again in months 4, 7 and 10.
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Table 11. Frequency of data collection
Frequency
Element
Monthly
Food
Two-monthly
Household supplies
Personal care products
Health care products
Personal items
Alcoholic beverages
Quarterly
Clothing and footware
Home electrical appliances
Furniture
Health care services
Other
Each 4th month
Rentals for housing
Semiannual
Higher education
Yearly
Schools
Open
Public services
Urban transportation
Transportation (intercity)
Fuel
Newspapers
Lotteries
Soccer
Air tickets
Source: Dane
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2.2.4. Sample Design
The sample design for the calculation of indices is a non-probabilistic one, due to the
operative difficulty to have a complete and up-to-date the inventory of marks, that
allow to identify all the sources of goods and services selected in the basket;
nevertheless the size of sample is controlled to guarantee a minimum of sources for
an item given the variability of the prices.
This process - to control the size of sample-, is realized monthly, according to the
following procedure:
STEP 1. For each item the geometric average of the variation of prices between the
present month and the previous one (relative) is calculated.
STEP 2. From the geometric average the variance of the relative indices of the items
prices is obtained.
STEP 3. The quotient of the square root of the variance and the estimated price is
calculated (relative error or coefficient of variation).
Considering that there is seasonality in the prices, the previous steps are realized for
each month of the year, obtaining then 12 relative errors for price per item.
a) The record with the maximum relative error for each item is identified.
b) In this record the values of the variance and the average relative index of
prices is taken.
c) Finally, the size of sample is calculated with the variance and the average
relative index of prices considering a sampling error of 5%. The generation of
errors that can be evaluated (relevant) it has been established that the
analyzed item must have, at least, 5 sources for prices.
The basket includes certain items of the education and housing groups. The
information is collected in schools, institutions of higher education and in the rented
dwellings. These sources are selected using a probabilistic design.
Education institutions: the design is a stratified random sampling with probability of
selection proportional to the size of the institutions in terms of number of students.
The stratification variables are: city, sector (official, nonofficial) and classification of the
school level (pre-school, primary, secondary and intermediate).
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Rented Housing: Selection with a probabilistic sample design of clusters and
stratified.


Clusters: they are integrated by the existing rented dwellings in selected blocks.
Strata: city, socioeconomic stratum and number of houses in the block.
The sample selects blocks; the collection process implies a preliminary task of logistic
character recognized as “re-enumeration”, consisting in listing the dwellings of the
selected block and identifying those that are rented. They are included as source for
CPI for real rentals expenditure if they belong to a block with more than 3 rented
dwellings.
Sample size
It is calculated based on the variability of the geometric average and a relative error
(ESREL) fixed of 5%, considering the following formula:
VAR (PG)
TM = (ESREL∗PG)2
Where:
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2.3 DESIGN OF EXECUTION
2.3.1. Training System
The training of the staff assigned to the collection, supervision, analysis and local and
central coordination is a factor of vital importance to succeed in any statistical
procedure and is part of the process of continuous improvement. The training of the
staff working on the Consumer Price Index project is oriented towards the
improvement of the human resource. This process is based on the partaking of
knowledge, the reading of the documents that support the statistical operation, and
on sharing the experiences in the practice of the survey. A suitable training prepares
the staff, to develop at the best, which has a direct impact on the perception on the
research by the sources of information, as well as on the organization in charge of the
generation of statistical information.
The training plan concentrates mainly on self-training, based on practical exercises as
a method to apprehend the theoretical basis included in methodological documents.
The process of learning and apprehension of the knowledge will consider, when
possible, techniques that promote the interaction of the staff in charge of the activity
with the trainees. Nevertheless it is necessary to establish strategies that allow all to
participate actively, avoiding that the staff with greater experience limits the
interaction time of the most recent members.
In order to achieve this objective activities are designed such as dramatizations and
presentations in charge of all the participants (and not exclusively of the coordinators
or those who exert these tasks). For that purpose, collectors, supervisors and analysts,
develop small presentations of no more than 20 minutes, where the points listed
below are developed including through practical exercises. Nevertheless, the
coordinating staff has to be present in these activities, in order to correct and/or to
verify the content of the presentation.
The following is the list of topics to be developed within the training activities:
 Conceptual framework
 Geographic coverage
 Reference population
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 Basket for observation of prices
 Classification of the structure of the basket

Concept of item or variety

Specifications of the item (Brands and Qualities)

Base Unit /Collected Unit/ Base Quantity /Collected Quantity

Base Price/Collected Price

Calculation of variations of prices between two periods
 Geo-reference and Cartography (Sector, section, block)
 Housing unit
 Possible classification of sources
 Selection of sources
 Inclusion of new sources/Replacement of sources.
 Sources for rentals, administration costs and domestic service.
 Sources
generated
by
the
probabilistic
survey/Sources
generated
by
the non-probabilistic survey.
 New features of technical character definition - application - process system –
effect in the index
 Imputation, promotions, special prices and discounts
 Periodicity of collection
 Items described as of monthly observation
 Definition and concepts associated with the “geometrical average”
 Items included in the national concept
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 Considerations on the field work
 Unique Collection Form and its use in the MCD sources (physical FUR)

System of collection (FUR/MCD)
The previously described activities imply among others, presentations by the staff in
charge of the collection, the staff in charge of the supervision, the staff in charge of
the analysis, the coordinating staff, field or survey assistant, readings, practical
exercises - case studies, workshops, dramatizations and debates.
The training exercises must take into consideration the operative particularities of
each city, as well as the observations sent from DANE’s Headquarters, A complete
training takes place at least once in a year (at time of the hiring process) or if the field
staff without experience in collection for indices exceeds 50% of the total.
At the end of these presentation exercises, all the participants should participate in
the discussion of a real life practical case, in order to link the theoretical knowledge
with the lived practical reality.
Once this module has been finalized, it is possible to go on with the next 9 (one for
each groups of expenditures of the CPI).
2.3.2
Preparatory activities
Awareness process
The awareness process is the responsibility of the collector (and is part of the support
activities of the supervisor of the zone) and has to be implemented when he/she visits
the source. The collector should explain to the source DANE’s statistical work, the
objectives of the visit and of the CPI, as well as the uses of the index. The purpose of
this awareness process is to improve the communication of the field staff with the
source, so that the source would accept to provide the required information, in the
conditions that have been stated. When it is possible, the staff could provide
documents presenting the CPI, with special emphasis on the basic information.
Selection of the staff
Once DANE Headquarters has sent the financial resources and the required profiles
for the vacant positions, the territorial directions must determine within the
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candidates those who satisfy the actual requirements for the job, a process that
consists in verifying and classifying the candidates according to their suitability for
each position.
The positions of the operative scheme of the CPI carried out within the territorial
directions and which are in charge of the contact with the sources and the collection
of quotes are the following:
Collector: They are in charge of collecting the information related to the surveys.
Supervisor: They are in charge of validating the information sent by the collectors.
Analyst: They are in charge of controlling the coverage and the quality of the
information.
Once the staff has been hired, the training begins for the whole group, using tools like
video projector, pamphlets, guidelines and dramatizations, as described in the section
on the training system.
On the other hand, the positions that apply for DANE Headquarters are those related
to the logistics, thematic and systems operations.
Logistic staff: They are in charge of the analysis, revision, correction and cleansing of
the information coming from the territorial directions using the control of the data of
the national aggregate.
Thematic staff: They are in charge of the definition and updating of the
methodological design of the research.
Systems staff: They are in charge to provide the support, maintenance and
development of the software required by the research.
2.3.3. Design of instruments
The instruments for the process of the collection and control of data are:
Collection Manual: It includes the basic instructions that collectors have to follow.
Supervision Manual: It includes the basic instructions that supervisors have to
follow.
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Critic Manual: It includes the basic instructions that information analysts have to
follow.
Users’ Manual for mobile devices: It includes the instructions and procedures to be
followed in the use of the MCD.
CPI User Manual: It includes the instructions and procedures to be followed in the
use of the Oracle analysis platform.
2.3.4
Collection of the information
The FUR is used for the collection of the information for the CPI. Presently, this form
is completed using a mixed system of collection: paper (according to particular
situations in the field) or directly using the MCD. The collection of quotes supposes a
personal visit; information cannot be collected by telephone and, in no case, this
function can be delegated to another person. The information been collected cannot
be informed to third parties.
The collected information is validated by the supervisor, who at the request of the
analyst and based on his results, visits the source and validates the information
collected in a term no greater than two days after the visit of the collector. The analyst
is the person in charge of analyzing and cleansing all the collected information.
The working groups are conformed in a proportion of three collectors for one
supervisor and one analyst.
The field work is organized so as to distribute the load; this system is generated
starting off with the programming of the information of the month (the sources that
must be visited in the month of reference, to collect items according to their
periodicity). Based on the forms that are automatically prepared, the collectors,
together with the supervisors, review, validate and determine their daily routes of
work in the collection forms, indicating the sources they plan to visit. This task must
be developed in such a way to distribute the workload in a balanced way over the
month with the exception of the two last days that must be dedicated to the collection
of perishable and the follow up of the behavior of prices of monthly observed items.
Daily the analyst must unload the information collected the previous day and load the
device with the sources to be visited and the items that each collector has to capture.
In doing so, he controls that the programming is being implemented according to
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what has been previously established. The collectors and supervisors begin the cycle
for the day initiating their tasks from the daily programming that is loaded in the
MCD.
For the case of items with daily, semimonthly, quarterly, four-month, semester and
annual periodicity, the collection takes into account the periodicity of each item of the
basket and the distribution assigned to each of the sources. For foods, for example
the sources are visited once a month. Nevertheless, for items of the clothes group (to
be observed on a quarterly basis), the logistic staff must guarantee that the sample is
distributed uniformly in a third part for each month; and so on for each component
elements of the basket.
Similarly, the homogenous distribution must guarantee that the visits to the sources
are realized approximately in the same dates, for example, the food source “XXX”
visited the tenth day, must be visited approximately on the same date in the following
month (guaranteeing that the interval between observations is a month); for items
with other periodicities, the dates of collection must be selected so that the prices are
observed with the required periodicity; for example for a clothes item, source “XXX”
visited on January 15 must be visited again on April 14 to16; July 14 to 16; October 14
to 16 and January 14 to 16.
With respect to the collection of items with open periodicity (also denominated
monthly observed items) the logistic team constantly verifies the variation of prices
for every day of the month, with the purpose of guaranteeing that the index catches
the changes observed throughout the period. This is the case for instance of movies,
lottery, urban transport, taxi, fuels, etc.
Supervision and control of the collection process
The supervision procedure implies a series of activities directed to the control of the
quality of the collected information, the identification of atypical situations with the
sources and special behaviors of the quotes derived from the collection.
The activities of the supervisor begin with the delivery of the list of sources to be
collected in the month to the collector. In order to verify that this list corresponds to
the sources to be visited in the corresponding period, the sources are classified by
geographic zones. The lists are remitted in physical or magnetic form.
Once the information has been collected and in agreement with the report of the
analyst and the selection of routes to be supervised daily, he/she visits the sources to
establish the veracity of the information, applying the rules indicated by the
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coordinator and included in the collection manual. The items (codes) to be reviewed
must be reported in the supervision list: Their record must follow the guidelines
referring to the analysis and verification of the characteristics of quotes such as the
relative representativeness of the sources, the selective supervision, increase or
decrease of price, as well as the application of technical new features with its proper
justification.
In the case of inconsistencies found during the supervision process, the corrections
are realized, the relevant observations are included and the information is returned to
the analyst.
The supervision process must concentrate on two fundamental aspects: the data
related to the source and the data with respect to items or varieties.
The data regarding the source include the revision and verification of:
 Name
 Address and phone number
 Period of collection
 Group and class
During the supervision process and according to its results, the supervisor should
inform the corresponding analyst of all the new features. In the case of the
introduction of a new source, it is fundamental for the supervisor to verify the
characteristics of the corresponding group and class.
The data of items or varieties include the verification of the quality and
completeness of the information for each item. The information associated with each
item includes prices, observations and specifications. Generally the variables that
must be reviewed are the following:

Brand or variety

Primary characteristics

Secondary characteristics

Base Unit
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
Previous quantity and previous price

Collected quantity and present price
 Technical new features, when required
 Observations, when required
The supervisor initiates his verification with the data of the source and continues with
information on items or varieties. Within the supervision over items, he must verify
that the information of items being reviewed includes the minimum required
specifications to identify it; if not, he/she has to add those considered necessary to
recognize the variety that is being compared between the quoted periods.
The supervisor must calculate the variations of prices taking into account the collected
quantity, the present price and the observations of the collected period as compared
to the previous period.
In case the data provided by the source are inconsistent with respect to those
obtained by the collector, it is fundamental that this situation be commented and to
determine if the informant (person) is the same or not. If such is the case, it is
necessary to verify with the collector, the information provided by the source, in order
to identify and to correct the bias that can derive when consulting a different
informant in each visit (the bias that can take place when consulting with a different
interlocutor collector/ supervisor or in each visit).
Since in the first days of the month, the supervisor does not have any task in terms of
supervision (as the working cycle initiates), it is his/her responsibility to accompany
and support the collectors of his/her team, with the purpose of evaluating all the
process of information taking, that implies among others, to obtain a suitable
interaction with the source, by means of the presentation, personal identification as
DANE’s staff, expression, technique of interview (access to the information), surveying
techniques (to complete or to clarify answers) and other abilities that guarantee the
quality of the information taken in the field.
As part of the control and continuous improvement tasks, the supervisor and his/her
working team (analysts and collectors), must find time to discuss, and to clarify the
doubts generated in the field process as well as to comment the omissions and
inconsistencies that have been found. These results must be included in the
supervision report or, if they are object of a conciliation, they must be discussed with
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the whole group in order to apply the new feature procedure that best adjusts to the
situation, according to the methodology of the CPI.
It is important to mention that the role of the supervisor is crucial, because it is
his/her specific responsibility to validate the information collected in field, applying
the technical parameters established to guarantee the control and quality of the
process.
The control required by the analysis activities corresponds to the local coordinator
and/or his (her assistant, who can define a random supervision of some sources, and
report on the organization of the review and the results of the supervision.
Monthly, the collection of prices has to be reviewed directly by the local coordinator
and/or his/her assistant, in order to state situations such as:
 Existence of the source
 Volume and quality of the collected information, verifying the date of collection
 Treatment (communication) of the informant by the collector and vice versa
 Other relevant aspects in the collection process
Operative scheme
The collector receives from the analyst the information concerning the route of work
or collection of the different goods and services. The collection of prices initiates with
the selection of the source following the established criteria. Then the collector must
evaluate the specification or variety of the item “most sold” and collect the whole
range of its specifications (characteristics that determine unambiguously the item).
The most common specifications are, for example, the brand of the good; its
packaging; the reference, etc.
The collector reviews constantly that this variety continues among the most sold in
the source; if it is no longer the case, he/she must find the most sold specificity and
include it in the periodic collection. With this procedure the methodology assures that
the prices variation incorporated in the index corresponds to the items of greater
demand in the market.
The collection also implies the quoting of the variety been followed, and the
verification of the specifications that allow to identify it. It also includes observing the
behavior of the market. Finally, the collector should be alert to the presence of new
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sources in the market and the new features that present the goods and services of
the basket.
It must be underlined that the collector must visit personally the informants and
obtain directly the retail prices of the goods and services in the sources that require it.
If a personal interview with the informant is not possible, the collector must inform
his/her supervisor of this situation, who will have to indicate the procedure to be
followed to decide on a revisit to secure the data. (In the development of this situation
the MCD should indicate “pending of collection”, so as to identify the pending
records).
The supervisor has a direct control on the collection tasks and he must verify the
information raised in field. The supervision of the sources and items is defined by the
local analyst and the local coordinator, who analyze the collected information and
require the revisits as needed. Finally the local coordinator of the survey and/or
his/her assistant verifies the information of the city and sends the data to DANE’s
Head Quarters.
Methods and mechanisms of the collection process
The collection of the CPI begins on the first working day of a month, and finalizes on
the last working day.
Each collector and supervisor are assigned a specific zone. They can access the
corresponding information in the following way:
 Space to digit the password to access the software of the device.
 Name of the programmed sources.
 Heading of the form. General information of the source: name, code, address,
phone number, zone and month to collect.
 Code of the item, specification, unit and price, technical new features and
observation.
The collection requires the actual control of the process that is performed among
others, from the analysis of the data by source, the obtained coverage and the
parameters associated with the quality and trustworthiness indicators.
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Data transmission
The collection, analysis and calculation of the CPI is executed in a database
management system, that allows the access in real time to the information collected
in the cities by the controls established in the central level. The information that has
been collected and analyzed in the different levels flows through states, according to
the operative state in which they are classified.
Within the local level, the possible states are the following:
 Pending of collection.
 In the collection process: records that are unloaded in the MCD and pending of
uploading in the system.
 Collected: records that include information on collection in the field.
 Supervised: records that include information on supervision.
 For supervision from the local level: records that have been selected for
supervision.
 In supervision: records that Have been unloaded in the MCD and pending of
supervision.
 Locally analyzed: records that have the approval of the local analyst.
 Local Quality control: records ready for obtaining the approval of the local
coordinator of the survey or his/her assistant. When this revision is performed,
this information transfers to the jurisdiction of DANE’s Headquarters and changes
to the state “for verification at central level” or “available at central level”. In this
step it is understood that the information is transmitted, since the data cannot be
updated by the local level.
 For verification at central level: records that are object of the analysis of the
central analysts.
 Available at central level: records that are under the responsibility of
the logistic team at DANE’s Headquarters.
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 To be supervised from the central level: records marked by the central analysts to
be supervised by the cities (a supervision requested from DANE’s Headquarters).
 Analyzed at Central Level: records that have the approval of the central analyst.
 Central Quality control: records ready for final approval of the central coordinator.
 Reviewed at Central Level: it includes the set of records validated by the logistic
team.
 Available for calculation: state of the records ready to enter the calculation (all the
processes of information analysis have culminated).
 In case the collection is done on paper, the information should be digitized at
local level using the MCD.
Control of coverage
With the purpose of controlling the coverage and the analysis of the flow of
information at the central level, the cities send a daily information to DANE’s
Headquarters based on the schedule of collection. There is also a schedule of physical
shipments when required.
The reports produced by the software characterize the records by state (records by
items, city, class and group source), so that the central and local analysts and
coordinators can determine the coverage obtained in each of the states of the
information.
On the other hand, the analysis performed at the local and central level includes the
validation of the information, the verification of the correct application of the technical
new features, the analysis of the average prices, the verification of the qualities and
specifications of each item (variety), the detection of inconsistencies and the request
of new features to be supervised.
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2.4 SYSTEMS DESIGN
The collection, analysis and calculation of the CPI are performed in a database
management system that is used for its administration and information management.
Within the benefits derived from the use of the system implemented from 2012, we
find the following:
 To have a centralized system that facilitates the control and the administration of
the whole process.
 To have a unique data repository avoids the lack of coordination in the updates
between the local systems and the headquarters.
 To use a robust basic database engine: ORACLE.
 To facilitate the online follow-up by DANE’s Headquarters office of the advance
the collection process in each city, so as to monitor the coverage and quality of
the information.
Main modules
The more relevant functional modules within the design of the system for CPI include
the parametrization module, the quality control module, the collection (that includes
the component of analysis) module, the calculation module, the generation of reports
module that includes different options associated with the user.
Parametrization module: this module allows the designated user to include the
profiles of the staff: data collector, supervisor, local analyst, local coordinator, central
analyst, central coordinator and technical secretary. This module also includes the
determination of the cities where the data collection is performed, the basket (items)
of products to be quoted, including the characteristics associated to each item, such as:
applicable specifications for each of them, measurement units, collection schedule, etc.
Similarly, this module indicates the sources to be followed, to open an operative
period (each beginning of the month) and to determine its impact on the collection of
prices for those items designated as of “national basket” or “regional basket”: effects
of the collection in one city that impacts the collection of others.
Quality control module: this module gives access to the indicators of quality and to
the different workloads.
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Collection module: this module is used to program the local collection, to realize the
analysis of the information and to program the supervision process. In the analysis
section, it is possible to review the information from indicators such as: the average of
prices and variations, minimum and maximum value of observation; average
variations calculated by item, city and level of income and distribution of the records:
collected and pending, among others.
Calculation module: this module performs the central closing of the process (the
records are sent for calculation) and executes the calculation.
Reports module: this module generates reports for the control of the operation,
including those on the process of collection and programming, and supervision; on
the characterization of the sample; on the verification of the state of the base at the
end of the month and calculation procedures, among others.
User module: this module updates the password of the users.
There is a restricted access to the modules according to the profile assigned to each
user, for example, the staff at the local level, have access to the information of their
city and assigned (s) zone (s), whereas the staff at the central level has a broader
access to the data.
Database
Once the information has been collected and analyzed, it is hosted into a unique
centralized database, so that it can be verified in real time. The collected data are
digitized using the Mobile Capture Device (MCD), and are entered into the CPI
database in their “collected” state; as each city and the central level advance in their
processes of revision, the records change progressively their state.
The edition permissions of the information derive from the process itself; when the
city level is in charge of the verification of the information. The local staff may modify
the information; on the other hand, if the analysis is a responsibility of the central
level, the central staff have an edition permission. Nevertheless, the system keeps
track of each modifications, of the date of the change and of the identification of who
realized the correction. The entrance to the platform is only allowed through the
identification of the user and a password controlled by the central level.
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Anonymization
The anonymization of the CPI database requires the establishment of a protocol that
guarantees the statistical reserve of the sources. This protocol is presently under
revision.
The information collected by the CPI is under statistical reserve, which implies that
only aggregated data can be disseminated, so that it is not possible to identify any
specific source.
Cleansing of the database
The cleansing of the database depends on the processes of supervision and local and
national analysis. All the changes performed by the different staff are registered in
the base, which guarantees their follow-up.
The states listed under the chapter: “data transmission” of this document, describe
the different states in which it is possible to locate a record in the base. The system
can be described as a constant flow of information that allows to follow how the
registry (quote) goes through the different required quality controls until arriving to
the final stage in which it is available for calculation.
Description of the data processing process
The data collected and analyzed in the CPI can only reviewed and modified by the
logistic and thematic personnel directly involved with the research. The structure of
the database includes all the necessary information so that the monthly process is
performed directly by the staff without intervention of the systems team.
There are no specific treatments to the data, excluding the calculation of the variation
for the case of the records marked with the technical new feature “period in periods
of delay”14
Consistency and correction mechanisms
The consistency of the information is determines by the controls located at the local
and central level, which purpose is to check the consistency of the variations in the
quotes as compared to the local and national reality. At aggregated level, and after
realizing the closing of the month, the consistency is checked on the basis of the
14
For more information please refer to the section “content of the imputation process” of this same
document.
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reports generated by the system, which provide the average variations for some
aggregates15. With this report it is possible to identify any atypical record so as to ask
for its verification before the production and dissemination of the index.
There are no possible corrections after the calculation and the dissemination
processes.
Generation of results and tables of results
The index is produced on the fifth day of every month (in the case this day is a holiday,
it is produced on the previous Saturday). Due to the sensitivity of the results, the
process of calculation and dissemination are performed in an isolated environment
within DANE’s Headquarters.
The thematic staff in charge (coordinator and technical secretary) of the research have
required and obtained the isolation of the network of electronic equipment involved
in the calculation, asking from all staff to turn off their cell phones or any other
electronic communication device.
The calculation uses a software within the Oracle platform, whereas the generation of
the bulletin, press release, presentations and Annexes in Excel uses a specialized
module that has been developed in FOX. The generation of all the dissemination
products is automatic, but after having been reviewed, validated and verified.
Integrality of the database
Because the database is centralized (all the data are included into a unique server16), it
is not necessary to aggregate local bases.
Regarding the collection of micro data, the MCD generate back up, so that it is
possible to retrieve the collected information in case of any anomalous situation.
15
This option is only available for the staff at the central level.
16
The research has mechanisms to locate the information in case of failure of the official server.
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2.5. DESIGN OF THE METHOD AND MEC HANISMS FOR QUALITY
CONTROL
The statistical production proceeds in two levels: the local level and the central level.
The six territorial directions of DANE represent the local level. These directions include
the information of the twenty-four cities selected in the country.
On the other hand, the central level is in charge of the statistical production that takes
place at Headquarters.
Each level has its own responsibility in the quality control process:
At the local level, each office and sub-office must organize, prepare, collect, realize,
supervise and capture the information related to the research. Each Territorial
Direction is responsible for the statistical quality of the monthly procedures of
collection and analysis; for this reason it must require from the staff in charge of the
coordination and supervision of the process, the truthful and actual fulfillment in the
different stages that have been established.
At the central level, the functional structure considers a technical coordinator and a
technical secretary, in charge of the technical and methodologic aspects, a
coordinator of the logistic team, with a support for the research, and staff in charge of
the analysis, validation, cleansing, correction and consistency of the information
reported by each city belonging to the geographic coverage of the research.
At the local level, the functional structure considers an operative coordinator, a
coordinator of indices, a support for the research, analysts, supervisors and data
collectors, which number depend on the number of quotes of the items observed in
each city. The operative coordinator is the person responsible for the research within
the Territorial Direction.
The coordinator of indices is in charge of the operative process and of its proper
operation, whereas the technical support is the person in charge of supporting the
coordinator in the coordination, instruction, training, and follow-up of the tasks
assigned by DANE Headquarters or the coordinator of indices.
The analyst must analyze and cleanse all the information that has been collected, so
as to assure its optimal quality when sending it to DANE’s Headquarters according to
the established schedule. The supervisors are in charge of validating the information
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collected in the field and of performing the adjustments when required for the
information to be reliable and of quality.
The collectors are in charge of visiting all the sources that are part of the sample of
the research, of collecting the information and of developing the process of
sensitization of the informants.
Analysis of the information
It initiates when the central or local analyst receive the records. He/she must execute
this task all throughout the month, in order to guarantee the fluidity of the process for
all the records, and to avoid the accumulation of the process at any time of the
month.
The information of the CPI is analyzed using a specific module, which first objective is
to allow the evaluation of the consistency of the information collected in each city,
with the purpose of detecting errors and to correct prices or determine new
observations.
This process considers the valuation of the data included for the period of reference
of each of the items included the basket, a process that requires realizing different
types of analysis to validate and provide final consistency to the collected data. The
basic coherence of the information is obtained through the following procedures:
 The horizontal analysis of the data. Using horizontal analysis, the historical
records of prices and technical new features applied in previous periods are
reviewed; the specifications of each item are revised to see whether they adjust to
the parameters established in the manuals of the research. The absolute previous
and present prices are analyzed, a verification is done that the previous and
present collected quantities have a relationship or an equivalence with the unit
and quantity indicated for each item (unit and quantity of measurement), the
registered variations are reviewed and the observations that collectors and
supervisors indicate are validated. This analysis also considers the verification of
the collection specifications, in order to establish whether the variation in the
price has a relationship or not with a possible change in the quality of the
collected variety.
This exercise provides the analyst with sufficient information for him/her to make
decisions regarding the behavior of the change in prices.
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
The vertical analysis of the data. On the other hand, the vertical analysis
reviews the prices and the minimum and maximum changes; the behavior of
the prices and their variations is analyzed within a local and national context,
and the previous and present average prices and the variations are evaluated.

Analysis of auxiliary tables. The central and local analysts use the
information presented in the auxiliary tables generated by the system, with the
purpose of completing the information required for the decision making
process with respect to the records they have to review. The information for
the calculation of the group source tables on the screen for analysis is
cumulative, that is, it considers all the information of the records that enter the
system and depend on all the filters excepting the state.
The auxiliary tables include:

Reference tables for prices and variations that calculate the prices and
variations: maximum, average and minimum for the month, in current year
and twelve months and by city.

Table of prices (minimum, maximum and average) that presents the prices
and variations of the actual records of the month.

Table summarizing the quotes and new technical features, in order to
determine the total number of quotes that must arrive when finalizing the
month, the collected ones and technical new features.

Table of geometric average by levels of income, in order to visualize the
result of the geometric averages by city, for each item and level of income.

Table of ranges of prices and variations in order to analyze the distribution
of the sample.
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
Information Context. All the local and central staff have to take into
consideration the behavior of the market known through mass media such as
news in TV or by radio, newspapers, consultations through Internet and
magazines, so that to have all instruments at hand for the proper decision
making, based on the objectives and scope of the CPI. In the cities, it is
recommended to resort to mass media of local character.
Within the analysis of the behavior of items included in the food group, the historical
results of the Producer Price Index and of the SIPSA (System of Prices of the Farming
Sector) that reports the prices of transaction in the different whole sale markets
(wholesale prices) are used, as well as the data published by different mass media.
The analysis using sources of information other than the data collected for the CPI,
considers the methodological differences of these results, but it helps identifying
tendencies of the behavior of the prices, and is a useful complement for the analysis.
Expectations of inflation an important parameter of analysis of the results derives
from the studies on the expectations of inflation reported by the different agents
operating in the market.

Analysis of results. Immediately after the calculation, the technical secretary
(directly in charge of the calculation of the index) and the thematic coordinator,
verify and analyze the results. The task implies the analysis of the most
relevant data and their historical variations corresponding to each publication
level, as well as the comparison of the results with the previously established
context analyses in order to verify the consistency of the results.
Indicators of quality
The analysis of the process of production of the CPI includes the generation of the
quality indicators, a tool which calculation initiates in the local level and that concludes
with the analysis of the tasks performed at the central level. The indicators have
constant follow-up and their results are published within the technical bulletin of the
index.
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Indicators of quality at local level
Rate of answer or coverage by sources Index (ITRF): it represents the relationship
between the number of sources visited in the month and the number of sources
expected to be visited in the month. The visited sources are those in which the
collector appears, independently of whether the source actually provides the
information, is in processes of liquidation or temporary closings. The objective of this
indicator is to determine the degree of answer or “coverage” in terms of the visited or
surveyed sources, as compared to the expected number of sources that had been
programmed or selected for the research.
This indicator is calculated as follows:
ITRF = (visited sources/expected sources) *100
100 is the ideal value of the indicator, that is, when all the expected sources are
visited. A value below 92 must be justified with documents that indicate the reasons
for such a low level; in addition, an evaluation of the need to take a remedial action is
due. It is possible that the index present values greater than 100% when new sources
are entered.
Non imputation or local estimation Index (INIL): it represents the difference
between the total number of records and those marked as technical new features by
the cities, which represent imputation, and its relationship with the total of records
expected for the collection period. The objective of this indicator is to establish the
level of imputation of the research.
This indicator is calculated as follows:
INIL = (RES - Records for imputation or estimation)/RES) * 100
Where:
INIL = Non imputation or local estimation Index
RES = expected number of records for the period of collection = number of items
previously reported for collection per period
Understanding the INIL. 100 is the ideal value of the indicator. A value below 92
must be justified with documents that indicate the reasons for such a low level; in
addition, an evaluation of the need to take a remedial action is due.
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Local quality Index 1 (IDCL1): it represents the quality of the chain of processes that
allows obtaining the products. It is generated through the verification of the quality of
the work in each stage of the collection and analysis. It is calculated from the
identification of the errors and omissions, assigning them to the minimum unit level
of information that is object of measurement (sources or records), but takes also into
account the volume of work that is correctly carried out, for the same level of
measurement.
This indicator is calculated as follows:
IDCL1 = (ICR + ICC+ICCA)/3
It is calculated as an arithmetic average between the quality index of the collection
analysis and the quality index of capture.
IDCL1= local quality index 1
ICR = collection quality index
ICA = analysis quality index
The interpretation of the indicator is similar to what has been previously commented.
Local quality Index 2 (IDCL2): it represents the quality of the chain of processes that
allows obtaining the product. It results from the comparison of the sum of errors and
omissions generated in all the stages of collection and analysis, with the total number
of expected records.
The objective is to determine the quality level of the processes of production as the
difference between the total number of expected records and the sum of processes
that did not adjust and were excluded from the production process.
This indicator is calculated as follows:
IDCL2 = ((RES-TPNC)/RES) *100
Where:
IDCL2 = Local quality Index 2
TPNC = sum of errors and omissions in the processes of supervision and analysis
quality control
RES = number of expected records
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Indicators of quality at central level
The quality indicators at the central level are as follows:
Rate of answer or coverage by records Index (ITRR): it represents the relationship
between the number of records or variables collected with actual information per
period of collection, and the expected number of records or variables to be collected
according to previous process of collection per period. The objective of this indicator
is to determine the degree of “actual” answer or “coverage” in terms of the records, as
compared to the expected number of records in the research.
This indicator is calculated as follows
ITRR = (actual records/expected records) *100
Where:
ITRR = (RES - NT/RES) *100
RES refers to the number of items previously selected for collection.
NT refers to the number of records number referred as CR (change of reference)
No imputation or central estimation Index (INIC): it represents the difference
between the total number of records and the number of records marked with a
technical new feature from the central level, which determines the imputation process
and its relationship with the total number of expected records for the period. The
objective of this indicator is to determine the level of imputation or estimation of the
research.
This indicator is calculated as follows
INIC = (RES - Records marked for imputation or estimation)/RES) * 100
RES = number of expected records
Trustworthiness Index (ICFA): it is the simple average of all the quality indicators of
the chain of processes that allows obtaining the product, from those calculated at the
local level and at the Territorial Direction, until those calculated in the central level.
The objective is to determine the quality level of the productive processes of the
research.
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This indicator is calculated as follows
ICFA = (ITRF + ITRR + INIL + INIC + IDCL1 + IDCL2)/6
Where:
ICFA = Trustworthiness index
ITRF = Rate of answer of sources index
ITRR = Rate of answer of records index
INIL = Local no imputation index
INIC = Central no imputation index
IDCL1 = Local quality index 1
IDCL2 = Local quality index 2
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2.6. DESIGN OF THE ANALYSIS OF RESULTS
2.6.1. Statistical analysis
The descriptive analysis of data in the CPI concentrates on the validation of the
variation of prices of the items of the basket of reference (Pt), between the periods of
time and on a monthly basis. Its purpose is to identify the pure variation in the prices
(that is, one that does not depend on the changes in the quality of the collected
variety).
This validation includes the analysis of the available information in order to identify
possible errors and to determine the economic support required by any atypical
behavior.
The analysis is performed in two stages of the operative process. The first one takes
place at the local level, whereas the second is performed in a centralized way; its
objective is to verify the information of the national aggregate.
2.6.2. Context Analysis
The variations of the CPI are compared with the results of other researches of DANE
which thematic coverage is related to the measurement of the CPI and are sufficiently
timely to provide results for the month of the process. For instance, the results
corresponding the food group are compared with the information from SIPSA (system
of prices of the farming system), in particular in the case of the behavior of the prices
taken in wholesale markets for perishable foods; this variation is compared
considering the methodological differences between the CPI and SIPSA data.
The results of the CPI without services are also compared to the information
published by the IPP for the total internal supply.
On the other hand, the historical coherence of results is checked by reviewing the
historical variations. All these tools allow the thematic analysis of the evolution of the
prices (ups and downs) Finally there is a review of the news referring to the behavior
of the different economic sectors and transmitted by the mass media such as TV
news, newspapers, magazines and consultations in Internet.
2.6.3. Committee of experts
There is an internal committee that reviews the monthly results of the research that
includes internal users; there exists also an external committee, including typically
external users of the information.
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On the other hand, in case that significant changes occur in some section of the
methodology of the index, internal and external meetings are held in order to enrich
the analysis of the proposals included in the methodology.
2.7 DESIGN OF THE DISSEMINATION
The variables been disseminated correspond to the monthly, current year and twelve
months index number, variations, contributions and shares. The information is
published on DANE’s webpage (www.dane.gov.co) on day 5 of each month (In case
this date a holiday, it is anticipated to the closest Saturday). In case the dissemination
occurs on a Saturday, it takes place at 12 noon, whereas if the day is a working day, it
happens at 7 p.m.
2.7.1. Administration of the data repository
The consolidated database is hosted within a server of exclusive use for indices at
DANE’s Headquarters. It is from this database that consultations and the products
required for the dissemination through the press bulletin are generated. At present,
these software use Visual FoxPro and Oracle. The application for the central handling
of this database is administered by a specific user.
2.7.2. Products and instruments of dissemination
The dissemination products result of the research that occur to know monthly are:
Press release
It presents the evolutions of some monthly aggregates for the national total and by
cities according to groups of goods and services, emphasizing the variation of the
basic expenses that contributed more to the variation of the total index. Its
presentation is flexible and depends on the particular conditions of the moment.
Technical bulletin
Besides the information included in the press release, it presents more detailed
figures (by sub-groups, basic expenditures and classifications), for the national total,
by cities and levels of income.
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Presentation
The presentation put forward the general results for the month, within a historical
context of the monthly variations, of those in current years and last twelve months,
information of the basic expenditures that presented the higher variations and higher
shares within the total variation. Finally it also includes the general results for the 24
cities.
The tables presenting monthly result of the CPI are part of the instruments of
dissemination. The variables incorporated within the Annexes are as follows: Index,
variation, contribution and share (for the month, current year and last twelve months)
Finally, the products that are available for general consultation are: the Methodology
of the CPI17 and the fixed weighting System18 (available on DANE’s webpage).
Additionally, there is a dynamic consultation system, where users can obtain historical
data of the Index applying selection filters.
The information indicated above is also available in the databanks of the organization,
where the results can be certified if required:
 Variation for the month, current year and last twelve months
 Contributions for the month, current year and last twelve months
 Index numbers base December 2008 = 100
 Linked CPI series since 1954
 National Information (broken down by cities and levels of income
17 http://www.dane.gov.co/files/investigaciones/fichas/Met_IPC_Ago13_11_14.pdf
18 http://www.dane.gov.co/index.php/esp/indices-de-precios-y-expenditureos/indice-de-preciosal-consumidor-ipc/86-economicas/precios/3030-sistema-de-ponderaciones-24-ciudades
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2.8 DESIGN OF THE EVALUATION OF QUALITY
To meet the quality standards is fundamental in the process of production of
statistics. In this sense the design of the evaluation of the production process of the
CPI is an important mechanism for its proper use.
The evaluation of the quality of the product is a continuous process that includes
several stages from its design to the process of production and dissemination of the
results. It includes among others:
 Certification with international experts: it consists of periodic visits of experts
of different international organisms who review of all the processes associated
with the index: component of systems, calculation and capture software
(validation processes), design of the sample, results and dissemination and finally
the approach to the external and internal users.
 Satisfaction Survey among users: it is a tool used to perceive the needs of
users. It is developed with the Databanks of the organization that are the first
channel of contact with the users.
 International Recommendations: during the process of design, as well as in the
permanent production of the CPI, the index receives technical assistance from
international organizations such as the International Monetary Fund (IMF) and
other National Statistics Offices with recognized experience in indices that
produce reports including evaluations and recommendations on the process.
 Internal and external Committees: They hold monthly meetings, in which they
review the results of the research in a context of short term economic analysis. It
is also a channel through which to inform specific users on the results of the CPI
in an explicit and confidential way. These two committees meet after the
publication of the results. It is a way to receive suggestions and recommendations
from users and advisers.
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3. RELATED DOCUMENTATION
In this section are referenced the documents related to the thematic design of the CPI.
They are the following:
 Methodology of the IPC-08.
 Specifications of consistency and validation used as guide in order to evaluate the
information reported in the instruments of collection (FUR and MCD) and the
structure of the tables of result (Annex 3).
 Methodology of statistical design: this document includes the methodological
considerations guiding the process of imputation of the IPC-08.
 Guidelines for the construction of confidence indicators of price indexes and
expenditures, with the purpose of guaranteeing the production of the IPC-08
within optimal quality standards.
 Methodology of the design of the required systems for the production of IPC-08.
 Manuals for the collection, capture, supervision and revision (used by the analyst)
that guide the field work at the local level.
Bogotá D. C., Cundinamarca
2015
95
Consumer Price Index (CPI)
General Methodology
GLOSSARY OF TERMS19
Basic Unit: unit of measurement to which the observed price is converted when the
quote is observed on an item that has a different quantity. This conversion of the
price is necessary, since the prices can only be compared when they refer to the same
unit of weight, volume or quantity (units). The basic unit agrees corresponds with the
minimal unit in which the item might be sold.
Change of reference: new feature through which to face the change of quality of a
specification. The absence can be due to the conditions of the market or to changes in
the primary characteristics of a specification, understood as those that differentiate a
product from another or even among varieties of the same product. The change of
reference is a procedure for “catching” implicitly the changes of quality in items.
Complementary source: it appears as an alternative to replace the absence of a
specification in a given source in which a perfect substitution cannot be applied or it is
not possible to apply a change of reference, looking for a specification of equal quality
in another establishment, without change in the characteristics of the item. In this
source no new feature of technical character can be applied. If the specification does
not appear again in the original establishment, a new specification has to be
determined. If this is not possible, another source has to be used or the specification
has to be assigned to an existing source where it has not been quoted.
Delay Period without information: period of collection without information for
some item or product, because the brand or the variety of an item is not available. It is
used when the absence of information is supposed to be temporary.
Elementary aggregate: it is a relatively homogenous set of goods both in terms of its
physical characteristics and in the behavior of the variations of prices of its
components.
Immediate substitution: it is a procedure developed to respond to the absence of a
specification replacing it by a “perfect substitute”, considering all the characteristics of
quality, and using as an approximation to this concept the price, the quantity and the
brand. The effect on the calculation system should be within the minimum acceptable
range of variation.
19
Source: http://sen.dane.gov.co:8080/senApp/module/conceptosModule/index.html; Metodología
IPC_98; Metodología IPC_60
Departamento Administrativo
Nacional de Estadística (DANE)
96
Mobile Capture Device (MCD): movable technological tool that used in the CPI with
the purpose of directly capturing in the field the inion of all the goods and services
that conform the basic basket.
Sources: the commercial, municipal or educative establishments that sell one or
several items, or provide a service to the final user.
Tariffs: prices of goods or services that are determined by a very restricted number of
producers or distributers. The producers or distributers can influence the behaviors
of the consumers imposing their prices to the different segments of the market,
according to the characteristics of the consumers. This situation occurs with public
utilities.
Unique Collection Form (FUR): it corresponds to the design of the collection form
with can be used as printed sheets or in a mobile device. This form is designed by
type of sources, and can include simultaneous information for one or several items of
different brands, varieties or specifications.
Bogotá D. C., Cundinamarca
2015
97
Consumer Price Index (CPI)
General Methodology
BIBLIOGRAPHY
Boskin, M. (1996). Toward a more accurate measure of the cost of living, final report to the
Senate Finance Committee. Washington D.C, United States: Diane Pub co.
Comité técnico proyecto nuevo IPC. (1997 y 1998). Reuniones técnicas, observaciones
y comentarios a los documentos del Proyecto. Bogotá, Colombia. (Technical meetings,
observations and comments to the Project document).
Código Nacional de Buenas Prácticas de las Estadísticas Oficiales. (2011). Bogotá.
Imprenta Nacional de Colombia. DANE. (National Good Practices Code for Official
Statistics).
Departamento Administrativo Nacional de Estadística (DANE). Bogotá, Colombia.
 Metodología IPC-60. Bogotá, Colombia. DANE
 Grupo de Trabajo IPC. (2002). Manual de Recolección IPC-98. (working party
CPI 2002; collection manual).
 Grupo de Trabajo IPC. (2002). Metodología IPC-98. (proceedings of the working
party).
 Grupo
de
Trabajo
coordinadores,
IPC.
(1996).
Memorias
de
Seminarios
del
IPC,
supervisores y recolectores. (working party: proceedings of the
seminar on C¨PI fir coordinators, supervisors and collectors).
 (1997-1998) Informes de evaluación Proyecto, Statistics Canada Symposium.
(Evaluation reports).
 (1998). Guía de uso del Nuevo IPC. Bogotá, Colombia. (Users guide for the new
CPI).
 (1992). Revisión 1992 IPC. Moncada, M. Metodología IPC-60. Bogotá: DANE.
Ducharme, L.M. (1994). Re-engineering the Canadian Consumer Price Index:
Proceedings of Statistics Canada. Otawa, Canadá. Symposium.
Freire, E. Informes del proyecto Nuevo IPC - Primer y segundo semestre de 1997.
Bogotá: DANE- Universidad del Valle (Report on the new CPI).
Departamento Administrativo
Nacional de Estadística (DANE)
98
ILO/IMF/OECD/UNECE/Eurostat/The World Bank Consumer price index manual:
Theory and practice Geneva, International Labour Office, 2004.
ILO Geneva 2003Report III: Consumer Price Index Seventeenth International
Conference on Labor Statistics Geneva.
Statistics Canada. (1992). The Consumer Price Index Reference Paper. Ottawa,
Canada: Statistics Canada.
Bogotá D. C., Cundinamarca
2015
99
Consumer Price Index (CPI)
General Methodology
ANNEXES
ANNEX 1. Main tables of results of the Consumer Price Index (CPI)
Table 1. Index of the previous and present month, monthly and accumulated
variation, by levels of income by cities and national total
Table 2. Indices and monthly variation by groups of goods and services, by cities
Table 2a. Index and monthly variation by group of goods and services, by cities for
the low income group
Table 2b. Index and monthly variation by group of goods and services, by cities for
the medium income group
Table 2c. Index and monthly variation by group of goods and services, by cities for the
high income group
Table 3. Index of the previous and present month, monthly variation, in current year
and last 12 months
Table 4. Monthly variation, in current year and last twelve months, by groups of goods
and services, according to levels of income for the national total and by cities
Table 5. Index of the previous and present month, monthly variation, in current year
and last twelve months, by level of income, according to sub-groups of goods and
services, national total and by cities
Table 6. Index and monthly variation by income levels, according to groups, subgroups, class of expenditure and basic expenditure for the national total and by cities
Table 6.A. Index and variation year run by income levels, according to groups, subgroups, class of expenditure and basic expenditure for the national total and by cities
Table 6.B. Index, variation twelve months by income level, according to groups, subgroups, classes of expenditure and basic expenditure for the national total and by
cities
Table 7. Present index, variation and monthly contribution, by levels of income
according to groups, sub-groups, classes of expenditure and basic expenditure
Table 7a. Present index, variation and contribution in current year, by income levels
according to groups, sub-groups, classes of expenditure and basic expenditure
Departamento Administrativo
Nacional de Estadística (DANE)
100
Annex 2. Logical soundness standards for the CPI collection unique format (FUR)
Denomination
IPC01
Name
Field
Number
Numerical
Description
Printing consecutive
number
Value
Notes
Must be
Number
included
Bogota, Medellin, Cali,
Barranquilla,
Bucaramanga,
Manizales, Pasto,
IPC02
City
Text
City name
Pereira, Cucuta,
Monteria, Neiva,
Must be
included
Cartagena,
Villavicencio, Riohacha,
Armenia, Quibdó.
IPC03
Code
Numerical
Source code
IPC03
Name
Text
Name of the source
IPC03
Address
Alfanumerical
IPC03
Phone
Numerical
Address of the
source
Telephone of the
source
Group, class,
Must be
consecutive
included
Must be
Text
included
Street, Number
Must be
included
Number
Group, Subgroup,
IPC05
Code
Numerical
Code of the item
Class, Expenditure,
Must be
Basic Expenditure,
included
Consecutive
Reference
IPC06
specificati Text
ons
Specifications for
Basic and secondary
Must be
price follow-up
characteristics
included
Quantity and base
IPC07
Base unit
Alfanumerical
unit for price
calculations
Number and unit
Must be
included
Bogotá D. C., Cundinamarca
2015
101
Consumer Price Index (CPI)
General Methodology
Annex 3. IPC Structure
IPC Structure
Structure Level
GROUP
Description of the expenditure
Code
FOODS
1000000
Cereal and bakery products
1100000
Cereals
1110000
Basic expenditure
Rice
1110100
Basic expenditure
Corn flour and other flours
1110200
Basic expenditure
Pasta products in all forms
1110300
Basic expenditure
Cereal preparations
1110400
Basic expenditure
Other cereals
1110500
Bakery products
1120000
Basic expenditure
Bread
1120100
Basic expenditure
Other bakery products
1120200
Tubers and plantain
1200000
Tubers
1210000
Basic expenditure
Potatoes
1210100
Basic expenditure
Yucca
1210200
Basic expenditure
Other tubers
1210300
Plantain
1220000
Plantain
1220100
Vegetables
1300000
Subgroup
Class
Class
Subgroup
Class
Class
Basic expenditure
Subgroup
Class
Fresh vegetables
1310000
Basic expenditure
Onions
1310100
Basic expenditure
Tomatoes
1310200
Basic expenditure
Carrots
1310300
Basic expenditure
Green vegetables mix
1310400
Basic expenditure
Other fresh vegetables
1310500
Vegetables
1320000
Basic expenditure
Beans
1320100
Basic expenditure
Green peas
1320200
Basic expenditure
Other dried vegetables
1320300
Basic expenditure
Canned vegetables
1320400
Fruits
1400000
Fresh fruits
1410000
Oranges
1410100
Class
Subgroup
Class
Basic expenditure
Departamento Administrativo
Nacional de Estadística (DANE)
102
Annex 3. IPC Structure (Continuation)
IPC Structure
Structure Level
Description of the expenditure
Code
Basic expenditure
Bananas
1410200
Basic expenditure
Tomate de arbol
1410300
Basic expenditure
Blackerry
1410400
Basic expenditure
Other fresh fruits
1410500
Preserve or dried fruits
1420000
Preserve or dried fruits
1420100
Meat and Meat derivatives
1500000
Class
Basic expenditure
Subgroup
Class
Meat
1510000
Basic expenditure
Beef
1510100
Basic expenditure
Pork
1510200
Basic expenditure
Chicken
1510300
Meat derivatives
1520000
Cold meats and sausages
1520100
Fish and seafood
1600000
Fresh, frozen or canned fish
1610000
Fresh, frozen or canned fish
1610100
Other seafood
1620000
Other seafood
1620100
Milk, fats and oils, eggs
1700000
Eggs
1710000
Eggs
1710100
Milk and derivatives
1720000
Basic expenditure
Milk
1720100
Basic expenditure
Cheese
1720200
Basic expenditure
Other milk derivatives
1720300
Oils and fats
1730000
Basic expenditure
Oils and fats
1730100
Basic expenditure
Fats
1730200
Other food
1800000
Brown sugar and sugar
1810000
Basic expenditure
Brown sugar
1810100
Basic expenditure
Sugar
1810200
Coffee and chocolate
1820000
Class
Basic expenditure
Subgroup
Class
Basic expenditure
Class
Basic expenditure
Subgroup
Class
Basic expenditure
Class
Class
Subgroup
Class
Class
Bogotá D. C., Cundinamarca
2015
103
Consumer Price Index (CPI)
General Methodology
Annex 3. IPC Structure (Continuation)
IPC Structure
Structure Level
Description of the expenditure
Code
Basic expenditure
Coffee
1820100
Basic expenditure
Chocolate
1820200
Seasonings
1830000
Basic expenditure
Salt
1830100
Basic expenditure
Other seasononings
1830200
Groceries
1840000
Basic expenditure
Soups and creams
1840100
Basic expenditure
Sauces and dressings
1840200
Basic expenditure
Gels, sweets, candies
1840300
Basic expenditure
Other groceries
1840400
Non alcoholic beverages
1850000
Basic expenditure
Juices
1850100
Basic expenditureB
Carbonated and malt beverages,
1850200
Basic expenditure
Otlher non alcoholic beverages
1850300
Food away from home
1900000
Food in restaurants
1910000
Lunch
1910100
Fast food
1920000
Basic Expenditure
Hamburguer
1920100
Basic Expenditure
Hot fast food
1920200
Other meals away from home
1930000
Basic Expenditure
Cafeterias
1930100
Basic Expenditure
Cold fast food
1930200
HOUSING
2000000
Expenses associated with housin
2100000
Dwelling rentals
2110000
Actual rentals paid by tenants
2110100
Owner occupied dwellings
2120000
Class
Class
Class
Subgroup
Class
Basic Expenditure
Class
Class
GROUP
Subgroup
Class
Basic Expenditure
Class
Basic Expenditure
Imputed rentals for housing
Other
Class
associated
with
expenditures
associated
with
housing
Other
Basic Expenditure
2120100
expenditures
housing
2130000
2130100
Departamento Administrativo
Nacional de Estadística (DANE)
104
Annex 3. IPC Structure (Continuation)
IPC Structure
Structure Level
Subgroup
Class
Basic Expenditure
Class
Description of the expenditure
Code
Gas and fuels
2200000
Gas and fuels
2210000
Gas
2210100
Public utilities
2220000
Basic Expenditure
Electricity
2220100
Basic Expenditure
Water,refuse and sewage collection
2200200
Household furniture
2300000
Subgroup
Class
Complete sets
2310000
Basic Expenditure
Living room
2310100
Basic Expenditure
Dining room
2310200
Basic Expenditure
Bedroom
2310300
Other furniture, lighting and decoration
2320000
Other furniture, lighting and decoration
2320100
Domestic appliances
2400000
Appliances for household rutine tasks
2410000
Basic Expenditure
Refrigerator
2410100
Basic Expenditure
Kitchen
2410200
Basic Expenditure
Washing machine
2410300
Basic Expenditure
Other household appliances
Class
Basic Expenditure
Subgroup
Class
Class
Spare
parts,
repair
and
2410400
rental
of 2420000
household appliances
Basic Expenditure
Subgroup
Repair of household appliances
2410100
Domestic tools
2500000
Class
Kitchen tools
2510000
Basic Expenditure
Cooking pots and pans
2510100
Basic Expenditure
Other domestic tools
2510200
Class
Table tools
2520000
Basic Expenditure
Glass, ceramic and chine ware
2520100
Basic Expenditure
Cutlery, flatware and silverware
2520200
Other home utensils
2530000
Other home utensils
2530100
Household textiles
2600000
Bedroom
2610000
Class
Basic Expenditure
Subgroup
Class
Bogotá D. C., Cundinamarca
2015
105
Consumer Price Index (CPI)
General Methodology
Annex 3. IPC Structure (Continuation)
IPC Structure
Structure Level
Description of the expenditure
Code
Basic Expenditure
Bedlinen, sheets, pillowcases
2610100
Basic Expenditure
Blankets, eiderdowns,
2610200
Basic Expenditure
Matresses, pillows
2610300
Class
Bathroom
2620000
Basic Expenditure
Curtains
2620100
Basic Expenditure
Towels, table linen, furniture covers
2620200
Cleaning materials
2700000
Subgroup
Class
Soaps, detergents and softeners
2710000
Basic Expenditure
Soaps
2710100
Basic Expenditure
Detergents, bleaches, softeners
2710200
Cleaners, insecticides and waxes
2720000
Basic Expenditure
Cleaners and desinfectants
2720100
Basic Expenditure
Insecticides
2720200
Basic Expenditure
Waxes
2720300
Other cleaning utensils
2730000
Basic Expenditure
Kitchen paper
2730100
Basic Expenditure
Other cleaning utensils
2730200
CLOTHING
3000000
Clothing
3100000
Men's clothing
3110000
Basic Expenditure
Men's shirts
3110100
Basic Expenditure
Men`s pants
3110200
Basic Expenditure
Men's underwear
3110300
Basic Expenditure
Other men's clothing
3110400
Class
Class
GROUP
Subgroup
Class
Class
Women's clothing
3120000
Basic Expenditure
Women's blouses
3120100
Basic Expenditure
Women`s pants
3120200
Basic Expenditure
Women's underwear
3120300
Basic Expenditure
Other women's clothing
3120400
Children's clothing
3130000
Basic Expenditure
Boys' shirts, girls' blouses
3130100
Basic Expenditure
Children's pants
3130200
Basic Expenditure
Other clothing for children
3130300
Class
Departamento Administrativo
Nacional de Estadística (DANE)
106
Annex 3. IPC Structure (Continuation)
IPC Structure
Structure Level
Basic Expenditure
Description of the expenditure
Code
Children's underwear
3130400
Baby's clothing
3140000
Basic Expenditure
Baby's shirts and dresses
3140100
Basic Expenditure
Diapers
3140200
Footwear
3200000
Men's footwear
3210000
Men's footwear
3210100
Women's footwear
3220000
Women's footwear
3220100
Sports footwear
3230000
Sports footwear
3230100
Children footwear
3240000
Children footwear
3240100
Clothing services
3300000
Clothing services
3310000
Basic Expenditure
Tailoring and hiring
3310100
Basic Expenditure
Laundry and cleaning
3310200
Footwear service
3320000
Footwea repair and cleaning
3320100
HEALTH
4000000
Health services
4100000
Consultation
4110000
Basic Expenditure
General medicine consultation
4110100
Basic Expenditure
Specialized medicine consultation
4110200
Exams
4120000
Laboratory
4120100
Diagnostic images
4120200
Hospitalization and other related services
4130000
Hospitalization and ambulance services
4130100
Health products and materials
4200000
Medicines and other related expenditure
4210000
Basic Expenditure
Medicines
4210100
Basic Expenditure
Contraceptives and other products
4210200
Class
Subgroup
Class
Basic Expenditure
Class
Basic Expenditure
Class
Basic Expenditure
Class
Basic Expenditure
Subgroup
Class
Class
Basic Expenditure
GROUP
Subgroup
Class
Class
Basic Expenditure
Class
Basic Expenditure
Subgroup
Class
Bogotá D. C., Cundinamarca
2015
107
Consumer Price Index (CPI)
General Methodology
Annex 3. IPC Structure (Continuation)
IPC Structure
Structure Level
Class
Basic Expenditure
Description of the expenditure
4220000
Orthopedical devices and others
4220100
Private
Subgroup
Code
Orthopedical devices and others
health
insurance
and
other
expenditures
4300000
Private health insurance
4310000
Basic Expenditure
Private health insurance
4310100
Basic Expenditure
Services delivered at home or outside
4310200
Compulsory health system expenses
4320000
Complementary payments
4320100
EDUCATION
5000000
Teaching, education
5100000
Class
Class
Basic Expenditure
GROUP
Subgroup
Class
Enrollment and attendance fees (basic, 5110000
intermediate levels), training
Basic Expenditure
Enrollment fees
5110100
Basic Expenditure
Attendance fees
5110200
Enrollment fees (Higher and non-formal
Class
education)
5120000
Enrollment fees
5120100
Other education related costs
5130000
Other education related costs
5130100
School supplies
5200000
Textbooks, notebooks and other supplies
5210000
Basic Expenditure
Textbooks
5210100
Basic Expenditure
Notebooks
5210200
Basic Expenditure
Other school supplies
5210300
Other school related expenses
5200000
Other school related expenses
5200100
RECREATION AND CULTURE
6000000
Basic Expenditure
Class
Basic Expenditure
Subgroup
Class
Class
Basic Expenditure
GROUP
Subgroup
Cultural materials and other related items 6100000
Class
Cultural materials
6110000
Basic Expenditure
Books
6110100
Basic Expenditure
Magazines
6110200
Basic Expenditure
Newspapers
6110300
Departamento Administrativo
Nacional de Estadística (DANE)
108
Annex 3. IPC Structure (Continuation)
IPC Structure
Structure Level
Description of the expenditure
Code
Games,toys, hobbies, masks, disguises,
Class
decorations
6120000
Games,toys, hobbies, masks, disguises,
Basic Expenditure
decorations
6120100
Gardens, plants, flowers and products for
Class
pets
6130000
Gardens, plants, flowers and products for
Basic Expenditure
Class
pets
6130100
Products for hobbies
6140000
Basic Expenditure
Records
6140100
Basic Expenditure
Sports devices and equipment
6140200
Recreational items and equipment
6200000
Subgroup
Class
Video equipment
6210000
Basic Expenditure
Television sets
6210100
Basic Expenditure
Other video and image equipment
6210200
Reception and
Class
Basic Expenditure
6220000
Reproduction of sound equipment
Other
Class
reproduction of sound
equipment
equipment
for
culture
6220100
and
entertainment
6230000
Computers, printers and other devices
6230100
Entertainment services
6300000
Recreation and entertainment services
6310000
Basic Expenditure
T.V. Services
6310100
Basic Expenditure
Tourism
6310200
Basic Expenditure
Entertainment related services
6310300
Basic Expenditure
Cultural services
6310400
Basic Expenditure
Subgroup
Class
Other expenses related with recreation
Class
Basic Expenditure
Class
Basic Expenditure
GROUP
Subgroup
and entertainment
6320000
Games of chance
6320100
Pets services
6330000
Pets services
6330100
TRANSPORTATION
7000000
Personal transportation
7100000
Bogotá D. C., Cundinamarca
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109
Consumer Price Index (CPI)
General Methodology
Annex 3. IPC Structure (Continuation)
IPC Structure
Structure Level
Description of the expenditure
Code
Purchase of vehicles and others for
Class
transportation
7110000
Basic Expenditure
Vehicles
7110100
Basic Expenditure
Others for transportation
7110200
Expenses
Class
Basic Expenditure
operating
personal
7120000
Fuel
Oil
7120100
purchase
and
car
maintenance
Basic Expenditure
services
7120200
Basic Expenditure
Parking service
7120300
Basic Expenditure
Mechanical services
7120400
Basic Expenditure
Battery
7120500
Basic Expenditure
Tires
7120600
Public transportation
7200000
Subgroup
Class
Urban transportation
7210000
Basic Expenditure
Bus
7210100
Basic Expenditure
Vans (or small buses)
7210200
Basic Expenditure
Taxi
7210300
Basic Expenditure
Other forms of urban transportation
7210400
Intercity transportation
7220000
Basic Expenditure
Intercity bus
7220100
Basic Expenditure
Other forms of intercity transpoprtation
7220200
Air transportation
7230000
Air ticket
7230101
COMMUNICATION
8000000
Communication
8100000
Postal service
8110000
Post letter service and other services
8110100
Telephone services
8120000
Telephone services
8120100
Celular phones and similar equipment
8130000
Celular phones and similar equipment
8130100
OTHER EXPENSES
9000000
Class
Class
Basic Expenditure
GROUP
Subgroup
Class
Basic Expenditure
Class
Basic Expenditure
Class
Basic Expenditure
GROUP
for
transportation
Departamento Administrativo
Nacional de Estadística (DANE)
110
Annex 3. IPC Structure (Final)
IPC Structure
Structure Level
Subgroup
Description of the expenditure
Code
Alcoholic beverages
9100000
Alcoholic beverages
9110000
Basic Expenditure
Beer
9110100
Basic Expenditure
Rum (aniseed)
9110200
Basic Expenditure
Other alcoholic beverages
9110300
Cigarettes and cigars
9120000
Cigarettes
9120100
Personal care products
9200000
Personal hygiene
9210000
Basic Expenditure
Oral hygiene
9210100
Basic Expenditure
Corporal hygiene
9210200
Basic Expenditure
Skin care
9210300
Basic Expenditure
Hair care
9210400
Basic Expenditure
Other products related with personal care 9210500
Class
Class
Basic Expenditure
Subgroup
Class
Class
Personal care services
9220000
Basic Expenditure
Haircut and hairdress
9220100
Basic Expenditure
Other services related with personal care
9220200
Jewellery and other personal items
9300000
Jewellery
9310000
Basic Expenditure
Gold and silver jewels
9310100
Basic Expenditure
Watches
9310200
Other personal items
9320000
Other personal items
9320100
Subgroup
Class
Class
Basic Expenditure
Class
Other goods and services
9400000
Basic Expenditure
Financial services
9400100
Basic Expenditure
Banking services
9400200
Insurance associated with transportation
9420000
Vehicle insurance
9420100
Class
Basic Expenditure
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