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Revising the CPI for the Eastern Caribbean Currency Union

Revising the CPI for the Eastern Caribbean Currency Union. ECE/ILO CPI Meeting Geneva, Switzerland May 10 -12, 2010. Introduction. Household income and expenditure survey Development of new market baskets Improving methods and procedures recommended in the CPI Manual , 2004

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Revising the CPI for the Eastern Caribbean Currency Union

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  1. Revising the CPI for the Eastern Caribbean Currency Union ECE/ILO CPI Meeting Geneva, Switzerland May 10 -12, 2010

  2. Introduction • Household income and expenditure survey • Development of new market baskets • Improving methods and procedures recommended in the CPI Manual, 2004 • Use of Price Index Processor System to process and compile the CPI CARTAC

  3. Household income and expenditure surveys • Caribbean Development Bank funded Living Conditions Surveys and countries expanded to HIES (2006-08) • Included both Diary and Recall components • COICOP expanded to 7 digit for region • Used to develop new market baskets consisting of 200 or so items at 5 to 7 digits CARTAC

  4. New CPI market baskets • Completed for Antigua, Anguilla, Dominica, Grenada, St. Kitts and Nevis, St. Vincent • Just starting in Montserrat • St. Lucia completed CPI revision in 2008 • Original market baskets developed using Caribbean COICOP extension • Had to be mapped to COICOP-ICP CARTAC

  5. Improvements to CPI methods and procedures • Improved, expanded samples of outlets • New item structures that include many new products (MP3, computer, cell phones) • COICOP replaces regional classification structures • Includes housing (owner’s equivalent rent) CARTAC

  6. Improvements to CPI methods and procedures (cont’d) • Use of the Price Index Processor System (PIPS) • Database application vs. spreadsheets • Compilation of indexes using geometric means • Imputation of missing prices using the short-term price change of related products • Better procedure for making quality adjustments • Better procedure for introducing new goods • CPIs are comparable across the region CARTAC

  7. Calculating the CPI using PIPS • Uses Jevons vs. Dutot or Carli formula at the elementary level • Uses two-stage geometric formula for higher-level aggregates CARTAC

  8. Calculating the CPI using PIPS (cont’d) • The formula actually used is determined by the reference period values for the weights, wbi • If b = 0, then the index is geometric Laspeyres • If b < 0, then the index is geometric Young • If b = (0 + t) / 2, the index is Törnqvist • For the ECCU countries the geometric Young index is being used CARTAC

  9. Calculating the CPI using PIPS (cont’d) • Missing prices are imputed using matched sample of prices between the two periods • The PIPS provides an outlier detection feature using three methods: • Z – score methods • Box-plot method • Log-normal method CARTAC

  10. Summary • ECCU countries are completing the CPI revision process • CARTAC has provided substantial TA in this process • Country CPIs in the region are comparable • Among the first wave to introduce many improvements presented in the CPI Manual • Next step is to develop a regional CPI CARTAC

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