Abstract
“Rational economic agents” making optimal choices, such as shifting to less expensive products, is a fundamental paradigm for theoretical and applied economics. This requires accurate and unbiased economic information on prices. Since the mid-1990s, several nations have switched to estimation methods for price indices that improve the accounting for the shifting basket of new goods and services produced in the economy. This change required the adoption of “ideal” measures of growth and price change. Nevertheless, many Asian nations continue to prepare non-ideal measures of growth and price change. This paper assesses the bias in current Asian measures of growth and price change and explores how such bias can lead to poor investor and policymaker decisions.
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