Abstract
In Poland, as in many other countries, to measure inflation, expressed both by the CPI and HICP, the Laspeyres price index with weights from the base period is used. Thus calculated index does not take into account changes in the consumption structure which are caused by changes in prices in the analysed time interval (i.e.: a year). Therefore, in countries where the CPI is determined based on the Laspeyres index, there is a high probability of its bias due to substitution of goods, but not only. The value of the CPI or HICP should approximate the real inflation as accurately as possible, among others, because these indicators are used to index nominal values in the economy, which in turn is important in price decisions made by enterprises. Searching for an answer to the question about the possibility of effective reduction of the measurement bias in measuring inflation, the authors conducted an empirical study whose main aim was to assess diversity of the level of inflation in the Visegrad countries at different levels of aggregation, with particular emphasis on the scale of the bias in measuring inflation resulting from substitution of goods. The study concentrated on determining the size of differences arising from the change in the index formula used when estimating the level of inflation. The article consists of six parts in which sources and types of bias in inflation measurement are discussed, index formulas divided into weighted and unweighted ones are reviewed, statistics on inflation in the Visegrad countries are presented in a dynamic approach, and the results of empirical research are presented and discussed. For the purpose of the research part and the need to perform a comparative analysis, data on the HICP value from the Eurostat database from the years 2011–2018 were used. Therefore, it seems that both the choice of the calculation formula and the level of data aggregation in the analysis of inflation is significant in its estimates.
Highlights
The Consumer Price Index (CPI) is one of the best known and most frequently used infla‐ tion measures in modern economics
The study presented in the paper took into account three levels of aggregation used in measuring inflation: COICOP 2, COICOP 3 and COICOP 4
Observing the annual inflation in the V4 countries for 2018 determined by the index formulas discussed (Tables 5, 6, 7, 8), it can be seen that the level of data aggregation for which the differences between indices would always be the highest cannot be indicated, the smallest differences always exist for the highest level of data aggregation (COICOP 2)
Summary
The Consumer Price Index (CPI) is one of the best known and most frequently used infla‐ tion measures in modern economics (see White 1999). The significance of the CPI in the monetary policy is important in the case of countries in which the central bank uses the strategy of direct inflation targeting (DIT) (Szyszko and Tura 2015; Janus 2019). It is worth noting that there may be numerous differences between CPI indices functioning at the level of individual countries, methodological and in terms of the content of the basket of goods. They are not suitable for international comparisons. There are countries where there is no difference in the composition of the CPI and HICP baskets
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