Weighting Elementary Prices in Consumer Price Index Construction Using Spatial Autocorrelation |
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| Authors: | Beatriz Larraz-Iribas Jose M Pavía-Miralles Guido Ferrari |
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| Institution: | 1. Department of Statistics , University of Castilla-La Mancha , Toledo , Spain beatriz.larraz@uclm.es;3. Department of Applied Economics , University of Valencia , Valencia , Spain;4. Department of Statistics “Giuseppe Parenti,” , University of Florence, Italy &5. Renmin University of China , PR China |
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| Abstract: | The Consumer Price Indexes (CPI) are used in current economic systems to measure inflation. When constructing CPIs, however, official institutions have systematically overlooked the spatial dimension of elementary prices. Ignoring the fact that prices are collected at geographical locations implicitly implies considering prices as spatially independent, when in fact they are not. To solve this problem, this article proposes to weight basic price data by taking into account the spatial correlation they display. The weighted geometric and arithmetic means suggested generalize and improve the simple geometric and arithmetic means currently in use. |
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| Keywords: | Elementary index Geostatistics Kriging Price index Spatial analysis |
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