Revising the CPI for the Eastern Caribbean Currency Union ECE/ILO CPI Meeting Geneva, Switzerland May , 2010

May 12, 2010 CPI in ECCU: 2 CARTAC Introduction  Household income and expenditure survey  Development of new market baskets  Improving methods and procedures recommended in the CPI Manual, 2004  Use of Price Index Processor System to process and compile the CPI

May 12, 2010 CPI in ECCU: 3 CARTAC Household income and expenditure surveys  Caribbean Development Bank funded Living Conditions Surveys and countries expanded to HIES ( )  Included both Diary and Recall components  COICOP expanded to 7 digit for region  Used to develop new market baskets consisting of 200 or so items at 5 to 7 digits

May 12, 2010 CPI in ECCU: 4 CARTAC New CPI market baskets  Completed for Antigua, Anguilla, Dominica, Grenada, St. Kitts and Nevis, St. Vincent  Just starting in Montserrat  St. Lucia completed CPI revision in 2008  Original market baskets developed using Caribbean COICOP extension  Had to be mapped to COICOP-ICP

May 12, 2010 CPI in ECCU: 5 CARTAC Improvements to CPI methods and procedures  Improved, expanded samples of outlets  New item structures that include many new products (MP3, computer, cell phones)  COICOP replaces regional classification structures  Includes housing (owner’s equivalent rent)

May 12, 2010 CPI in ECCU: 6 CARTAC Improvements to CPI methods and procedures (cont’d)  Use of the Price Index Processor System (PIPS)  Database application vs. spreadsheets  Compilation of indexes using geometric means  Imputation of missing prices using the short-term price change of related products  Better procedure for making quality adjustments  Better procedure for introducing new goods  CPIs are comparable across the region

May 12, 2010 CPI in ECCU: 7 CARTAC Calculating the CPI using PIPS  Uses Jevons vs. Dutot or Carli formula at the elementary level  Uses two-stage geometric formula for higher-level aggregates

May 12, 2010 CPI in ECCU: 8 CARTAC Calculating the CPI using PIPS (cont’d)  The formula actually used is determined by the reference period values for the weights, w b i  If b = 0, then the index is geometric Laspeyres  If b < 0, then the index is geometric Young  If b = (0 + t) / 2, the index is Törnqvist  For the ECCU countries the geometric Young index is being used

May 12, 2010 CPI in ECCU: 9 CARTAC Calculating the CPI using PIPS (cont’d)  Missing prices are imputed using matched sample of prices between the two periods  The PIPS provides an outlier detection feature using three methods:  Z – score methods  Box-plot method  Log-normal method

May 12, 2010 CPI in ECCU: 10 CARTAC Summary  ECCU countries are completing the CPI revision process  CARTAC has provided substantial TA in this process  Country CPIs in the region are comparable  Among the first wave to introduce many improvements presented in the CPI Manual  Next step is to develop a regional CPI