UNECE Workshop on Consumer Price Indices Session 5: Calculation of a Chained CPI Presentation by Cengiz Erdoğan, TurkStat October 10-13 Istanbul, Turkey.

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Presentation transcript:

UNECE Workshop on Consumer Price Indices Session 5: Calculation of a Chained CPI Presentation by Cengiz Erdoğan, TurkStat October Istanbul, Turkey

Calculation of An Annual Chain CPI Factors affecting changes in demand Purchaser’s tastes or preferences Changes in technology which improve productivity Changes in real incomes Changes in population and its distribution

Calculation of An Annual Chain CPI Frequent weight updates and chained price indices Advice is to update at least every 5 years, and more often if there is evidence of rapid changes in consumption/production patterns. The shorter the period between weight updates, the less likely that changes in preferences, improved technology, and changes in income will have a large impact on our price measures.

Calculation of An Annual Chain CPI So far the discussion has been of direct comparisons – between places s and t. There will be seen to be a case for comparing say s and t by comparing say, s with a, then a with b, then b with t. The indices or links between each successive pair of places can then be linked together by successive multiplication to form a chain index. Any index number formula can be used for the links.

Calculation of An Annual Chain CPI The CPI is calculated as a chain linked index with annual update of the weights. Thus, from January 2005 to December 2005 all higher level indices were calculated as From January 2006 to December 2006 all higher level indices will be calculated as Where indicates the weights based on 2/3 of the HBS of 2003 and the HBS of 2004, price updated to December 2005.

Calculation of An Annual Chain CPI From January 2007 to December 2007 all higher level indices will be calculated as From January 2008 to December 2008 all higher level indices will be calculated as

Calculation of An Annual Chain CPI Laspeyres formula is used to aggregate basic item indices to obtain group and all item indices Aggregated short term indices at the group level are chained to the previous indices

Calculation of An Annual Chain CPI Weights are price updated to ensure period covered by expenditure weights and the base price period correspond.

Calculation of An Annual Chain CPI