Price Index Series Research Articles

INFLATION IN SOUTH AFRICA: A TIME‐SERIES VIEW ACROSS SECTORS USING LONG‐RANGE DEPENDENCE

AbstractIn this paper I examine the time‐series evolution of the log consumer price index series in South Africa, disaggregating the data by sectors. I examine the time period 1990m1‐2008m12, i.e. focusing on the post‐apartheid period. I used methodologies based on fractional integration using parametric and semiparametric techniques. The results indicate that the (total) inflation rate in South Africa is long memory, with an order of integration in the range (0, 0.5). The same happens with most of the data disaggregated by sectors with values of d above 1 in the log prices. Evidence of I(0) inflation is obtained in some cases for “fruits and nuts”, “vegetables” and “sugar”, and evidence of mean reversion in the log prices is only obtained in the case of “fish and other seafood”.

Distance Selling, Internet and Price Dynamics (Vente a Distance, Internet et Dynamique des Prix) (French)

The share of retail sales made via distance selling has increased steadily, driven by Internet sales. Meanwhile, a large body of research has been devoted to measuring the impact of online shopping on consumer prices. These studies are based primarily on microeconomic data and they reveal contrasting effects due to diverging microeconomic behaviours. This paper aims to use a macro-sector estimation to show how the price-decreasing effects of Internet shopping outweigh the price-increasing effects. In that purpose, we use French price index series and distance selling sales covering about 30 sectors, from 1990 to 2007. We find that downward effects dominate: the recent development of distance selling, due to the development of online selling, results in lower prices.

Exploring Spatial Dynamics with Land Price Indexes

The purpose of this study is to explore the within-region spatial dynamics of appreciation and depreciation rates using three different representations of geographical space. Mean value indexing methods are used to construct global land price indexes, sub-market land price indexes and local land price indexes using transaction price data for vacant residential land within the City of Hamilton, Ontario, between 1995 and 2003. The results are validated against Statistics Canada’s series of New Housing Price Indexes, followed by a comparison of the relative performance of the three geographical representations of land price indexes. The results indicate that the mean value indexing methods are robust, although subject to outliers and sample selection bias, and clearly illustrate the spatial dynamics of annual appreciation and depreciation rates across the study area. The results also underscore the need for regular surveillance of the spatial dynamics of urban land markets.

Is iron ore priced as a commodity? Past and current practice

As iron ore is the fundamental steel production resource, predicting its price is strategically important for risk management at related enterprises and projects. Based on a signal decomposition technology and an artificial neural network, this paper proposes a hybrid EEMD-GORU model and a novel data reconstruction method to explore the price risk and fluctuation correlations between China’s iron ore futures and spot markets, and to forecast the price index series of China’s and international iron ore spot markets from the futures market. The analysis found that the iron ore futures market in China better reflected the price fluctuations and risk factors in the imported and international iron ore spot markets. However, the forward price in China’s iron ore futures market was unable to adequately reflect the changes in the domestic iron ore market, and was therefore unable to fully disseminate domestic iron ore market information. The proposed model was found to provide better market risk perceptions and predictions through its combinations of the different volatility information in futures and spot markets. The results are valuable references for the early-warning and management of the related enterprise project risks.

Construction and updating of property price index series

PurposeThe purpose of this paper is to construct a hedonic property price index in the segmented housing market.Design/methodology/approachThree different research questions are investigated. The first considers how to identify separate local housing markets, with the use of a regression‐tree approach, and the second concerns when it is possible to update a price index, with a recursive regression approach. Finally, the question about seasonal adjustment is investigated.FindingsOverall, the hedonic approach is the best method to use. Moreover, the County of Stockholm is not one market in the sense that the market can be represented by only one property price index. It can be best described as a number of different sub‐markets where the property prices grow differently. The results suggest that there exist at least five different price indexes in the County of Stockholm. The results also support that recursive regressions are two appropriate methods to answer the research questions. Here, the empirical analysis suggests that the parameter estimates converge relatively fast toward the estimate using all observations.Practical implicationsThe paper illustrates how to derive sub‐markets in the construction of a price index and when to update a price index series.Originality/valueThe introduction of new financial products, such as property derivatives, to the market has made the construction and quality of property price indexes more important. High quality price indexes are vital when it comes to, for example, pricing property derivatives. The paper facilitates this.

Finite-sample distribution-free inference in linear median regressions under heteroscedasticity and non-linear dependence of unknown form

We construct finite‐sample distribution‐free tests and confidence sets for the parameters of a linear median regression, where no parametric assumption is imposed on the noise distribution. The set‐up studied allows for non‐normality, heteroscedasticity, non‐linear serial dependence of unknown forms as well as for discrete distributions. We consider a mediangale structure—the median‐based analogue of a martingale difference—and show that the signs of mediangale sequences follow a nuisance‐parameter‐free distribution despite the presence of non‐linear dependence and heterogeneity of unknown form. We point out that a simultaneous inference approach in conjunction with sign transformations yield statistics with the required pivotality features—in addition to usual robustness properties. Monte Carlo tests and projection techniques are then exploited to produce finite‐sample tests and confidence sets. Further, under weaker assumptions, which allow for weakly exogenous regressors and a wide class of linear dependence schemes in the errors, we show that the procedures proposed remain asymptotically valid. The regularity assumptions used are notably less restrictive than those required by procedures based on least absolute deviations (LAD). Simulation results illustrate the performance of the procedures. Finally, the proposed methods are applied to tests of the drift in the Standard and Poor's composite price index series (allowing for conditional heteroscedasticity of unknown form).

PPI and Measuring Inflation in Business Transactions in Egypt

This paper discusses and analyzes selected pertinent statistical and economic questions raised by the shift in price statistics towards covering broader markets of the economy, namely introducing a Producers Price Index (PPI) series in place of the Wholesale Price Index (WPI) series in Egypt since the beginning of 2008. The paper discusses the price index gap in Egypt and the methodology employed in constructing the newly-introduced PPI. The paper proposes tackling several characterized problems concerning the construction of the elementary indices and quality of PPI statistics in light of e-commerce and globalization, existing limited coverage of service sectors, and improper indices for cost escalation and contracting. The paper also proposes devising a core inflation measure for inflation targeting in Egypt.

Social classification: The need to update in the present scenario

Socioeconomic Status (SES) is an important determinant of the standard of living and health status as it influences the incidence and prevalence of various health conditions. Socioeconomic status also influences social security in terms of the accessibility, affordability, acceptability and actual utilization of various health facilities. The need for developing a uniform system of socioeconomic classification of the population universally based on the income with scientific basis and should applied with ease and simplicity in each sector or strata wise of population. There have been several attempts to develop different scales to measure socioeconomic status but Prasad's classification (1961)(1) based on the per capita monthly income and later modified in 1968(2) and 1970,(3) has been extensively used in the Indian scenario and has been quite effective in performing the t task under discussion. But with the passage of time and due to the inflationary trends in the economy, the original income limits set in these classifications have become substantially low and impractical. Realizing this need, Kumar(4) has updated the classification linked with the All India Consumer Price Index (AICPI) which has also become impractical today and has lower validity due to great variations in the Consumer Price Index. By 1993–1994 however, the inflation rate was governed by the All India Whole Price Index series,(5) creating an urgent need to link Prasad's classification (1961) with the All India Whole Price Index whereas Prasad's (1961) classification has taken for a basis of modification in terms of latest scenario of cost of living index (COLI). In order to solve this problem, a hypothetical value (0.53)(6) has been developed in relation to the base year of 1993-1994 when the new series of the All India Wholesale Price Index started.(5,7) The hypothetical value was calculated based on the concept of the cost-of-living index (COLI), which pertains to the WPI in India. As the COLI is not directly observable, the WPI employs a number of formulae that offer approximations to the measurement objectives. WPI uses the Laspeyres formula to average the price changes due to inflation across different categories of items, because COLI for the each current month is based on the cost of this month's market prices for the items used by the community may be changed due to inflation in wholesale price, of achieving the standard of living actually attained in the base period.(8,9) The ratio of this hypothetical cost to the actual cost of the base period is the lowest expenditure level necessary at this month's price to achieve the base period's living standard. This framework of WPI and the inflation rate from the base period has guided and will continue to guide operational decisions about the construction of the index.(8,9) It is a simple method of multiplying the income limits of classification with a multiplication factor and rounding off the values to the nearest rupee. Multiplying the AIWPI at the time of study by the hypothetical value could help to derive the multiplication factor. Therefore, the multiplication factor = Value of AIWPI(10) × 0.53 The next step is to multiply Prasad's income limits by the multiplication factor. There is one more class-‘Below Poverty Line’ (BPL) included by the author because this concept of Below Poverty Line was not started in 1961. Income limits thus obtained, are far more practical and realistic. For example, to compute a social classification for December 2004, the multiplication factor will be = 189.2(10) × 0.53 = 100.27 or 100. The proposed classification for this period is given in Table 1. Table 1 Proposed social classification for the month of December 2004 As such the value of the AIWPI has not varied according to the geographical area or work forces and urban or rural conditions do not influence the classification. Hence, the value of the AIWPI can be used safely and are regularly published in various weekly fortnightly financial newspapers and magazines.

The effect of tapering on the semiparametric estimators for nonstationary long memory processes

In this paper, we study, by a Monte Carlo simulation, the effect of the order p of “Zhurbenko-Kolmogorov” taper on the asymptotic properties of semiparametric estimators. We show that p = [d + 1/2] + 1 gives the smallest variances and mean squared errors. These properties depend also on the truncation parameter m. Moreover, we study the impact of the short-memory components on the bias and variances of these estimators. We finally carry out an empirical application by using four monthly seasonally adjusted logarithm Consumer Price Index series.

Global influences on UK manufacturing prices: 1970–2000

We introduce the first consistent series of domestic-product and related import price indices at the industry level for the UK, using the data to analyse both domestic and international determinants of UK manufactured product prices. Foreign influences on UK prices in domestic markets are always present, but domestic cost movements dominate. We show that the pass-through of world-price, tariff and exchange rate changes into product prices is partial in general and varies markedly between product categories. Standard tariff and exchange rate theories overstate price responses to global pricing determinants and fail to allow for variation between industrial sectors. Such theories can mislead when used for policy analysis and prediction.

Efficiency and Seasonality in the UK Housing Market, 1991–2001*

AbstractThis paper considers the informational efficiency of the UK owner‐occupied housing market over the period 1991–2001. Original small‐area, monthly, quality‐adjusted house price index series are developed from raw housing transaction observations for a number of UK counties and cities. These series are then tested in an autoregressive setting for characteristics indicative of weak market efficiency and seasonality. The major conclusion drawn is that there exists little evidence to support notions of inefficiency in these markets over the period considered.

Experimental price indexes for financial services

This paper discusses how the Australian Bureau of Statistics (ABS) compiled its series of experimental price indexes for financial services. It discusses how the ABS calculated both the weight, and the estimates of changes in price, for interest margins, fees and charges, and indirect taxes. It also discusses some of the more difficult issues which the ABS encountered during development.

Stability and Consistency of Seasonally Adjusted Aggregates and Their Component Patterns

In situations where groups of economic time series are likely to have seasonal dynamics in common, use of seasonal information across series in estimating their seasonal factors should improve the seasonal factor estimates for individual series. Such information sharing can also be the basis for consistent seasonal adjustment of combinations of series. It also provides information about dominant seasonal patterns in component series. A methodology based on principal component analysis, developed earlier by the author with Eric Bartelsman, is applied to series of price indexes and production indexes from EU countries. Evidence of common structure is revealed. The implications of common estimation of seasonal factors are explored.

Robust estimation and inflation forecasting

This paper considers various models emerging from the Fisher effect and/or the term structure of interest rates for inflation forecasting. This paper, it is believed, makes a contribution to the literature on estimation of the models by using a procedure that is robust for non-normal errors, improving the efficiency of the estimates considerably. The Consumer Price Index series, 90 days and 180 days Australian bank-accepted bill rates, covering the sample period 1968Q1 to 1998Q4 were used in this study. Contrary to earlier findings, strong evidence was documented supporting the Fisher effect in the presence of a structural break with the break-point being at 1980Q1. The overall results suggest that the error correction model of the Fisher effect, the term structure of interest rates and short-run dynamics produce superior forecasts, in particular when the models were estimated using the robust method. These findings have important implications for economic policy analysis.

Recent Trends in Workload, Input Costs, and Expenditures in the Air Force Medical Service Direct Care System

A study was conducted to examine the relationship between two types of trends in the Air Force Medical Service Direct Care System (AFMS/DCS): trends in expenditures, total and by categories; and trends in medical workload, defined as the sum of inpatient admissions and outpatient clinic visits. Expenditure and medical workload data were extracted from the Medical Expense and Performance Reporting System Executive Query System. Medical inflation data were obtained from the Bureau of Labor Statistics Producer Price Index series. Between fiscal years 1995 and 1999, the AFMS/DCS experienced a 21.2% decrease in medical workload, but total (nominal) expenditures declined only 3.6%. Of all expenditure categories, only inpatient medical care, outpatient medical care, and military-funded private sector care for active duty personnel (supplemental care) have any direct relationship with AFMS/DCS medical workload. Real expenditures for the three categories above decreased by 20.3% during the 5-year period. Accounting for inflation and considering only expenditures related to medical workload, these results suggest that the AFMS/DCS is spending approximately 20% less money to do approximately 20% less work.

Recent Trends in Workload, Input Costs, and Expenditures in the Air Force Medical Service Direct Care System

A study was conducted to examine the relationship between two types of trends in the Air Force Medical Service Direct Care System (AFMS/DCS): trends in expenditures, total and by categories; and trends in medical workload, defined as the sum of inpatient admissions and outpatient clinic visits. Expenditure and medical workload data were extracted from the Medical Expense and Performance Reporting System Executive Query System. Medical inflation data were obtained from the Bureau of Labor Statistics Producer Price Index series. Between fiscal years 1995 and 1999, the AFMS/DCS experienced a 21.2% decrease in medical workload, but total (nominal) expenditures declined only 3.6%. Of all expenditure categories, only inpatient medical care, outpatient medical care, and military-funded private sector care for active duty personnel (supplemental care) have any direct relationship with AFMS/DCS medical workload. Real expenditures for the three categories above decreased by 20.3% during the 5-year period. Accounting for inflation and considering only expenditures related to medical workload, these results suggest that the AFMS/DCS is spending approximately 20% less money to do approximately 20% less work.

An Overview of Experimental U.S. Consumer Price Indexes

The Consumer Price Index (CPI) has come under intense scrutiny in recent years. To help assess potential differences between what the CPI measures and how it is used for various purposes, the Bureau of Labor Statistics has created a series of experimental price indexes. This article contrasts how the CPI is currently constructed with those experimental indexes. Specifically, experimental CPPs have been constructed for two population groups, older Americans and poor Americans. In addition, experimental geometric-mean and superlative indexes have been developed that move the CPI away from its traditional “fixed-market-basket” concept.

Some Price Indexes for Quebec and Montreal (1760-1913)

The study of price trends is of paramount importance to the economist and the historian interested in the socio-economies of the pre-industrial era. In Canada, many historians have collected various regional price data for the latter part of the eighteenth century and the first half of the nineteenth, but we are still lacking a consistent and composite price index that could help to extract the trends in real income, real production, and real wealth for the century before Confederation. A set of price indexes for the cities of Quebec and Montreal from 1761 to 1867 helps fill this gap. In the case of Quebec, these indexes are drawn from the data for 20 products over 106 years, while for Montreal (where sources are more limited) they are based on data for 10 products over 101 years. We extended the series of price indexes for Quebec to 1913 by splicing it with Humfrey Michell’s price indexes for the latter part of the nineteenth century.

F-tests for seasonal differencing with a break-point

The classification between stochastic trend stationarity and deterministic broken trend stationarity is important because incorrect inferences can follow if a stationary series with a broken trend is incorrectly classified as integrated. In this paper, we consider joint tests for regular and seasonal unit roots null hypothesis against broken trend stationarity alternatives where the location of the break is known or unknown. Based on the F-test proposed by Hasza and Fuller (1982, Ann. Statist. 10, 1209–1216), we develop testing procedures for distinguishing these two types of process. The asymptotic distributions of test statistics are derived as functions of Wiener processes. A response surface regression analysis directed to relating the finite sample distributions and the breaking position is studied. Simulation experiments suggest that the power of the test is reasonable. The testing procedure is illustrated by the Canadian consumer price index series.

REVISED REAL CANADIAN GNP ESTIMATES AND CANADIAN ECONOMIC GROWTH, 1870–1926

Revised Canadian real GNP estimates for the 1870–1926 period, based on the nominal GNP estimates constructed by M. C. Urquhart and on a variety of sector‐specific price indexes, are presented below. The construction of this revised real GNP series allows for the creation of real output estimates for the major sectors of the Canadian economy as well as for a new implicit price index series. These revised estimates cast new light on our present understanding of Canadian economic growth and reinforce the view that the Canadian wheat boom probably played an important and positive role in the process of Canadian economic development.