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Stability of CPIs in consideration of changes in a sample size

This study examines the impact of reducing the number of representative commodities on consumer price index (CPI) calculations. The findings indicate that the resulting indices are not significantly affected by changes in the number of observed prices. However, further analysis is needed for smaller area indices and extrapolation beyond the estimation period. Additionally, comparing two reduction methods suggests that minimizing differences between reduced set indices and original indices produces better results, although both methods have limitations.

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Stability of CPIs in consideration of changes in a sample size

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  1. Stability of CPIs in consideration of changes in a sample size

  2. Conclusions No matter what is the method of the number of representative commodities reduction the differences between resulting indices and original index numbers seem to be reasonably small. One could say then that for this level of aggregation the index value is not sensitive to the change of the number of observed prices. Additional analysis is necessary to determine changes in case of small area indices (lower aggregation levels, regional indices). It would also be of interest to extrapolate calculations outside the estimation period.

  3. Comparison of two presented methods of reduction leads to the conclusion that can be expressed as follows: better results were obtained for method of minimalization of differences between reduced set index numbers and original indices. Nevertheless both methods possess negative sides. • The main weakness of correlation method is systematic error generated by the applied way of reducing of the number of products.

  4. Second method seems reasonably precise. Nevertheless it is worthwhile to notice the set of eliminated commodities covers mainly these most typical for the group (most representative). That in turn lies in a little bit strange position – in an opposition to common sense thinking; one can say that commodities should be chosen to give the best representation of the group. Of course it may be answered that it is the whole set that should be representative and not individual commodity. But...

  5. THANK YOU !!!

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