Changes in relative consumer prices and the substitution bias of the Laspeyres price index: Ireland, 1985-2001
Citation:
Somerville, R.A. 'Changes in relative consumer prices and the substitution bias of the Laspeyres price index: Ireland, 1985-2001'. - Economic & Social Review, Vol. 35, No. 1, Spring, 2004, pp. 55-82, Dublin: Economic & Social Research InstituteDownload Item:
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Abstract:
This paper shows that Irish relative consumer prices have changed significantly, 1985-2001, at the ten commodity-group level. A ?true? cost-of-living index is derived from Madden?s (1993) parameter estimates for an Almost Ideal Demand System. Despite relative price changes, the substitution bias of a computed Laspeyres index is small, and the official Consumer Price Index tracks the computed index closely. Superlative indices are also constructed, but are not satisfactory cost-of-living indices in this context. Cost-of-living indices are computed for different income groups, and the impact of inflation in recent years is found to be negatively correlated with income.
Author: Somerville, R. A.
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Economic & Social StudiesType of material:
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Full text availableKeywords:
Consumer prices, Inflation, Cost of living indices, IrelandISSN:
0012-9984Licences: