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  5. Bias in the Consumer Price Index: What Is the Evidence?

Journal of Economic Perspectives

ISSN 0895-3309 (Print) | ISSN 1944-7965 (Online)

Bias in the Consumer Price Index: What Is the Evidence?

  • Brent R. Moulton
Journal of Economic Perspectives
vol. 10, no. 4, Fall 1996
(pp. 159–177)
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Abstract

Recent research has suggested that the upward bias of the U.S. consumer price index may be significant, and correcting the biases would have important long-run effects on the federal budget deficit. The author describes the sampling procedures used in constructing the consumer price index, and gives simple examples of formula bias and quality adjustment. He then reviews the empirical evidence, attempting to show which biases are reliably estimated and which estimates of bias are based on extrapolation and guesswork. The author discusses possibilities for further research leading to potential improvements in the consumer price index.

Citation

Moulton, Brent R. 1996. "Bias in the Consumer Price Index: What Is the Evidence?" Journal of Economic Perspectives, 10 (4): 159–177. DOI: 10.1257/jep.10.4.159

JEL Classification

  • E31 Price Level; Inflation; Deflation
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