NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Mismeasurement of the CPI

Kenn Ariga, Kenji Matsui

NBER Working Paper No. 9436
Issued in January 2003
NBER Program(s):Productivity, Innovation, and Entrepreneurship

In this paper, we investigate several key problems in Japanese economic statistics. We use CPI mismeasurements and biases as an example to explore the roots of the problems and also to offer guidelines for improvements. We emphasize 3 major shortcomings shared by many official statistics in Japan: (1) long delays in adjustments, (2) lack of proper coordination, and 3) insufficient information disclosure. In the analysis of CPI bias, we limit our focus to potential biases due to aggregation, survey methodology and sample selection procedures. We estimate that, in recent years, the commodity CPI inflation rate is biased upward by at least 0.5% per year, even if we assume away the potential bias associated with the quality adjustment, delay in incorporating changes in consumption basket, and other important unresolved problems.

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Document Object Identifier (DOI): 10.3386/w9436

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