ANALYSIS OF OFFICIAL AND ALTERNATIVE ESTIMATES OF INFLATION
K.P. Gluschenko
Institute of Economics and Industrial Engineering of the Siberian Branch of the Russian Academy of Sciences, Academician Lavrentyev Ave., 17, Akademgorodok, Novosibirsk, 630090, Russia
Keywords: индекс потребительских цен, потребительская корзина, смещение ИПЦ, consumer price index, consumer basket, CPI bias
Abstract
The mass media frequently accuse official statistics of underestimating the inflation rate (consumer price index - CPI) by half to two-thirds. This paper analyzes potential sources of distortion of the official CPI, concluding that systematic errors causing underestimating are absent, and deliberate distortions are impossible. It also analyzes a number of alternative estimates of inflation and demonstrates that they are based either on the use of a consumer baskets that do not correspond to any real pattern of consumption and deliberately overstate rise in the price level, or on some indirect rationale that does not bear criticism. The only alternative estimate that can be taken seriously is greater than the 2005 official CPI by 2 percent points, that is, by 20 % rather than by a factor of 2 to 3.
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