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David Fenwick

The challenges facing compilers of CPIs in developing countries: and the need for a supplementary handbook to the International Manual on CPIs and implications for the ILO resolution on consumer price indices. David Fenwick. Overview.

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David Fenwick

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  1. The challenges facing compilers of CPIs in developing countries: and the need for a supplementary handbook to the International Manual on CPIs and implications for the ILO resolution on consumer price indices David Fenwick

  2. Overview • A supplementary handbook on CPIs, being compiled by the UK Office for National Statistics, will help compilers meet the challenges facing CPI producers in developing countries • Useful supplement to the ILO manual • There is a strong argument for a re-think on ILO resolution on Consumer Price Indices • The work on the handbook has increased awareness of the unique problems encountered by CPI compilers in developing countries • Metadata on CPIs in Africa shows variable compliance with international best practice (ILO resolution) • But the resolution is not prescriptive and doesn’t encourage a uniform approach • Increased demand for international harmonisation of CPI methodology • Greater globalisation • Harmonisation taking place at regional level

  3. Background • The ILO Consumer Price Index Manual comprehensively covers virtually all theoretical & practical aspect of CPI compilation. • but practitioners in developing countries want a supplementary source of day-to-day practical guidance • UK Office for National Statistics taking forward as part of DFID-funded project to support the International Comparison Programme (ICP) in Africa & Statistical Capacity Building • During ICP Africa programme & drafting of handbookmore general issues arose • Harmonisation of CPIs across the different regions of Africa • The integration of the International Comparison Programme (ICP) with national CPI programmes

  4. The supplementary handbook • Structureand content • broadly follows that of the ILO resolution on CPIs and the ILO CPI Manual • CD Rom will be included will • Contain an electronic version of the handbook, extensive background data, training material & possibly an electronic copy of the CPI Manual • Be provided free to compilers of CPIs in national statistical institutes in Africa

  5. Draft Submitted 1. Quick review by co-editors Iterative process if required 2. Peer review – including all interested experts 2. Review by developing world practitioners Quick review by co-editors 3. Redrafting 4. Final review by co-editors The supplementary handbook • Compilation process • Primary author & co-author have been assigned to each chapter tasked with working together to produce a first draft • Editorial process (inc. AfDB, google groups, seminars)

  6. Editorial process • Editorial review process used to facilitate feedback on the ILO manual • implications for the ILO manual • log of potential issues being kept • For example, treatment of second-hand goods • Potential implications for ILO resolution • On second-hand goods the ILO Resolution is at best unhelpful and at worse wrong

  7. ICP Africa statistical capacity building • Support provided for statistical capacity building in Africa in the context of the latest round of the International Comparison Programme (ICP) • Purchasing Power Parities (PPPs), calculated by comparing average prices between countries for a well-defined and representative "basket" of goods and services • as currency converters instead of monetary exchange rates to compare GDP in real terms • calculation of PPPs requires the collection of prices data, similar to a CPI, and expenditure data from household budget surveys and national accounts • ICP Africa as a catalyst for sustainable statistical capacity building • improvement in national CPIs through the integration of ICP methods, particularly price collection. • supporting the harmonisation of CPIs across African sub-regions.

  8. Integration of ICP components into national CPIs • feasibility studies into the practicalities and costs and benefits of further integration in the future of ICP components into national CPIs conducted in Uganda and Zambia • Studies concluded that national CPIs can draw benefits from the ICP, and vice versa • technical improvements (geographical & outlet-type coverage, outlet selection, structured product descriptions for item selection) • better data quality control (data validation & editing, documentation, enhanced skills) • Cost savings (more common use of same prices data)

  9. Sub-regional harmonisation of CPIs • Harmonisation in sub-regions of Africa have had a variable success • Current position is that • Harmonisation is on a sub-regional basis, reflecting the different economic “communities” and activities of the different regional organisations. There is no HICP for Africa and no plans to introduce one. • The ILO resolution of consumer price indices is of limited help in the process of harmonisation because it avoids being prescriptive • User demand for an HICP is also variable but there is a significant, ever more vocal and increasing call for cross-country comparability • Where an HICP is being produced harmonisation • It is often partial • Sometimes misdirected, e.g. focussing on the introduction of a “common” basket & ignoring more fundamental issues • But progress is being made (Afristat, UEMOA,Comesa, SADC?)

  10. Analysis of CPI Metadata for Africa • Analysis of metadata 18 African countries held on a database managed by the African Development Bank • Variable compliance with international best practice & ILO resolution • Geographical Coverage - 56% cover urban areas only and 17% cover the capital city only • Classification - 50% use COICOP • Weighting - 67% have weights from a Household Budget Survey (HBS) between 1990 – 1999 and 17% from an HBS older than 1990 (ILO resolution states that weights should be updated at least every 5 years) • Base Year - 67% of CPIs used a base year between 1990 and 1999, 11% have a base year pre-1990 Continuing efforts & further investment needed to facilitate increased compliance of national & harmonised CPIs to ILO resolution.

  11. The ILO resolution • Drafting style- not too prescriptive in areas where limited international consensus or where compromises are needed for practical reasons • Three observations can be made • Since the publication of the ILO manual & the adoption of ILO resolution, the consensus on what constitutes a “fit-for-purpose” CPI has increased • A clear vision can be the most effective enabler for progress • Resolution does not directly address harmonisation • Harmonisation happening at sub-regional level • This could be a barrier to global harmonisation

  12. Conclusions • Many African countries still fall short of ILO resolution • Regional programmes for harmonisation • have not necessarily advanced methodology • could be a barrier to global harmonisation • Supplementary handbook will be useful addition to material available to facilitate improved CPIs • More could be achieved with a more prescriptive ILO resolution • The resolution should cover harmonisation • There should be a more systematic approach to metadata collection to monitor progress towards a family of internationally comparable indices

  13. The end

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