Joint UNECE/ILO Meeting on Consumer Price Indices Some examples of Quality changes in the Korean CPI Jinho Hur, National Statistical office of Korea KNSO

KNSO Korea National Statistical Office 2 KNSO May Contents Example 1. Price in services : Salad price at Pizza Hut Example 2. Sales Prices Example 3. Long term rent price

KNSO Korea National Statistical Office 3 KNSO May Example 1. Price in services Salad price at Pizza Hut 1) Situation Date price8,900 won6,500 won For 1~4 personsFor 1~2 persons Additional cost for one person 1,500 won2,000 won

KNSO Korea National Statistical Office 4 KNSO May Example 1. Price in services : Salad price at Pizza Hut 2) Alternative solutions considered consideringprice 1)No change0% 2) Compared for 4 persons 8,900won->10,500won(+18%) 3) Compared for 3 persons 8,900won->8,500won(-4.5%) 3) Conclusion Solution 3 selected as the most representative

KNSO Korea National Statistical Office 5 KNSO May Example 2. Sales Prices 1) Price collecting method of the manufactured goods Collecting date Once a month, usually between the 10th and 15th in the month Sales price Reflected without considering the length of the sales period

KNSO Korea National Statistical Office 6 KNSO May Example 2. Sales Prices 2)-1 New rules At least 7 days of sales length is needed to reflect the sale price 2)-2 Examples IF) Normal price : 2,000 won, Sale price : 1,500 won Sale periodThe price we take At least seven days1,500 won Less than seven days2,000 won

KNSO Korea National Statistical Office 7 KNSO May Example 3. Long term rent price Chunsei  Unique situation on the market for rented dwelling in Korea  Deposit made to the owner of the dwelling, the lessor, as a kind of security  It corresponds to approximately 2 years’ rent and is paid by the lessee the at the beginning of the renting period  After a period of two years, the chunsei money is paid back to the lessee. If the rental agreement is prolonged, the chunsei has to be paid again.

KNSO Korea National Statistical Office 8 KNSO May Example 3. Long term rent price  The weight of chunsei in the CPI is 66.4/1000  The weights is calculated by converting the amount paid in chunsei from the 2005 Census into an imputed monthly rent, and dividing by total consumption expenditure

KNSO Korea National Statistical Office 9 KNSO May Example 3. Long term rent price  Price collectors collect price data each month from all the chunsei sample household as if it were monthly rent  Example  If 20 household are surveyed and if one household’s chunsei money increased by 10% and the other 19 households have not changed,  Then, we calculate 10% divied by 20 households(simplified for calculation)  => 0.5%

KNSO Korea National Statistical Office 10 KNSO May Example 3. Long term rent price  Raised critcism : CPI should report a 10% increase rather than 0.5% in this case. what is your opinion about this criticism?