1.1 A price index is a measure of the proportionate, or percentage, changes in a set of prices over time. A consumer price index (CPI) measures changes in the prices of goods and services that households consume. Such changes affect the real purchasing power of consumers’ incomes and their welfare. As the prices of different goods and services do not all change at the same rate, a price index can only reflect their average movement. A price index is typically assigned a value of unity, or 100, in some reference period and the values of the index for other periods of time are intended to indicate the average proportionate, or percentage, change in prices from this price reference period. Price indices can also be used to measure differences in price levels between different cities, regions or countries at the same point in time.
1. The Guidelines are designed to assist policymakers in considering reforms to strengthen the quality of their public debt management and reduce their country’s vulnerability to domestic and external shocks, irrespective of whether they are structural or financial in nature. Vulnerability is often greater for smaller and emerging market countries because their economies may be less diversified, have a smaller base of domestic financial savings and less developed financial systems, and may be more susceptible to financial contagion through capital flows. Nevertheless, events since the global financial crisis in the late 2000s demonstrate that larger and developed economies are vulnerable too. The Guidelines should therefore be considered within the broader context of the factors and forces affecting a government’s financial position more generally, and the management of its balance sheet. Governments often manage large foreign exchange reserves portfolios, their fiscal positions are frequently subject to real and monetary shocks, and they can have large exposures to contingent liabilities and to the consequences of poor balance sheet management in the private sector. However, irrespective of whether financial shocks originate within the domestic banking sector or from global financial contagion, prudent government debt management policies, along with sound macroeconomic and regulatory policies, are essential for containing the welfare and output costs associated with such shocks.
10.1 This chapter focuses on a number of expenditure areas that pose particular problems for price index compilers, both in terms of identifying an agreed conceptual approach and also overcoming practical measurement difficulties. Six areas have been selected for discussion, mainly from the service sector. They are:
11.1 This chapter discusses the general types of potential error to which all price indices are subject. The literature on consumer price indices (CPIs) discusses these errors from two perspectives, and this chapter presents the two perspectives in turn. First, the chapter describes the sources of sampling and non-sampling error that arise in estimating a population CPI from a sample of observed prices. Second, the chapter reviews the arguments made in numerous recent studies that attribute bias to CPIs as a result of insufficiently accurate treatment of quality change, consumer substitution and other factors. It should be emphasized that many of the underlying issues discussed here are dealt with in much greater detail elsewhere in the manual.
12.1 Consumer price indices (CPI) are one of the most important and widely used of macroeconomic indicators. As well as informing economic policy, they are used for indexation of welfare benefits, pensions, gilts and securities, and also for escalation clauses in private contracts. Accuracy and reliability are paramount for a statistic as important as a CPI.
13.1 The consumer price index (CPI) is one of the most important statistical series. Where statistics are categorized according to their potential impact, the CPI and its variants are always in the first rank. It follows therefore that it must be published, and otherwise disseminated, according to the policies, codes of practice and standards set for such data.
14.1 This chapter focuses on the value aggregates for goods and services that relate the major price indices, including the consumer price index (CPI), to one another. The chapter provides a deeper context for the domain of the CPI covered in Chapter 3 and the index weights dealt with in Chapter 4. It also deepens the context for defining the sample unit and the set of products, discussed in Chapter 5.
The answer to the question what is the Mean of a given set of magnitudes cannot in general be found, unless there is given also the object for the sake of which a mean value is required. There are as many kinds of average as there are purposes; and we may almost say in the matter of prices as many purposes as writers. Hence much vain controversy between persons who are literally at cross purposes. (Edgeworth (1888, p. 347)).