Producer Price Index Manual: Theory and Practice ... - METAC

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Producer Price Index Manual Table 22.2. Artificial Seasonal Data Set: Quantities Year t Month m t,m q 1 t,m q 2 t,m q 3 t,m q 4 t,m q 5 1970 1 3086 0 82 0 10266 2 3765 0 35 0 9656 3 4363 0 98 0 7940 4 4842 0 26 0 5110 5 4439 0 75 700 4089 6 5323 91 82 2709 3362 7 4165 498 96 1970 3396 8 3224 6504 1490 0 2406 9 4025 4923 2937 0 2486 10 5784 865 2826 0 3222 11 6949 0 1290 0 6958 12 3924 0 338 0 9762 1971 1 3415 0 119 0 10888 2 4127 0 45 0 10314 3 4771 0 14 0 8797 4 5290 0 11 0 5590 5 4986 0 74 806 4377 6 5869 98 112 3166 3681 7 4671 548 132 2153 3748 8 3534 6964 2216 0 2649 9 4509 5370 4229 0 2726 10 6299 932 4178 0 3477 11 7753 0 1831 0 8548 12 4285 0 496 0 10727 1972 1 3742 0 172 0 11569 2 4518 0 67 0 10993 3 5134 0 22 0 9621 4 5738 0 16 0 6063 5 5498 0 137 931 4625 6 6420 104 171 3642 3970 7 5157 604 202 2533 4078 8 3881 7378 3269 0 2883 9 4917 5839 6111 0 2957 10 6872 1006 5964 0 3759 11 8490 0 2824 0 8238 12 5211 0 731 0 11827 1973 1 4051 0 250 0 12206 2 4909 0 102 0 11698 3 5567 0 30 0 10438 4 6253 0 25 0 6593 5 6101 0 220 1033 4926 6 7023 111 252 4085 4307 7 5671 653 266 2877 4418 8 4187 7856 4813 0 3165 9 5446 6291 8803 0 3211 10 7377 1073 8778 0 4007 11 9283 0 4517 0 8833 12 4955 0 1073 0 12558 556
22. Treatment of Seasonal Products each month of the year. Unfortunately, due to the seasonality in both prices and quantities in the always available products, this type of index can be systematically biased. This bias is apparent in the modified Turvey data set. 22.10 Since many PPIs are month-to-month indices that use annual basket quantity weights, this type of index is studied in Section H. For months when the product is not available in the marketplace, the last available price is carried forward and used in the index. In Section I, an annual quantity basket is again used but instead of carrying forward the prices of seasonally unavailable items, an imputation method is used to fill in the missing prices. The annual basket-type indices defined in Sections H and I are implemented using the artificial data set. Unfortunately, the empirical results are not satisfactory because the indices show tremendous seasonal fluctuations in prices. This volatility makes them unsuitable for users who want up-to-date information on trends in general inflation. 22.11 In Section J, the artificial data set is used in order to evaluate another type of month-tomonth index that is frequently suggested in the literature on how to deal with seasonal products: namely the Bean and Stine Type C (1924) or Rothwell (1958) index. Again, this index does not get rid of the tremendous seasonal fluctuations that are present in the modified Turvey data set. 22.12 Sections H and I showed that the annual basket-type indices with carryforward of missing prices (Section H) or imputation of missing prices (Section I) do not get rid of seasonal fluctuations in prices. However, in Section K, it is shown how seasonally adjusted versions of these annual basket indices can be used to successfully forecast rolling-year indices that are centered in the current month. In addition, the results in Section K show how these annual basket-type indices can be seasonally adjusted (using information obtained from rolling-year indices from prior periods or by using traditional seasonal adjustment procedures). Hence, these seasonally adjusted annual basket indices could be used as successful indicators of general inflation on a timely basis. 22.13 Section L concludes with several suggestions for dealing with seasonal products. B. A Seasonal Product Data Set 22.14 It will prove to be useful to illustrate the index number formulas that will be defined in subsequent sections by computing them for an actual data set. Turvey (1979) constructed an artificial data set for five seasonal products (apples, peaches, grapes, strawberries, and oranges) for four years by month, so that there are 5 times 4 times 12 observations, equal to 240 observations in all. At certain times of the year, peaches and strawberries (products 2 and 4) are unavailable, so in Tables 22.1 and 22.2, the prices and quantities for these products are entered as zeros. 6 The data in Tables 22.1 and 22.2 are essentially equal to that constructed by Turvey except that a number of adjustments were made to it in order to illustrate various points. The two most important adjustments were as follows: • The data for product 3 (grapes) were adjusted, so that the annual Laspeyres and Paasche indices (which will be defined in Section D below) would differ more than in the original data set; 7 and • After the aforementioned adjustments were made, each price in the last year of data was escalated by the monthly inflation factor 1.008, so that month-to-month inflation for the last year of data would be at an approximate monthly rate of 1.6 percent per month, compared to about 0.8 percent per month for the first three years of data. 8 6 The corresponding prices are not zeros, but they are entered as zeros for convenience in programming the various indices. 7 After the first year, the price data for grapes was adjusted downward by 30 percent each year and the corresponding volume was adjusted upward by 40 percent each year. In addition, the quantity of oranges (product 5) for November 1971 was changed from 3,548 to 8,548 so that the seasonal pattern of change for this product would be similar to that of other years. For similar reasons, the price of oranges in December 1970 was changed from 1.31 to 1.41 and in January 1971 from 1.35 to 1.45. 8 Pierre Duguay of the Bank of Canada, while commenting on a preliminary version of this chapter, observed that rolling-year indices would not be able to detect the magnitude of systematic changes in the month-to-month inflation rate. The original Turvey data set was roughly consistent with a month-to-month inflation rate of 0.8 percent per month; that is, prices grew roughly at the rate 1.008 each month over the 4 years of data. Hence this second major adjustment of the Turvey data was introduced to illustrate (continued) 557
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Contents Foreword..................
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Contents D. The Incorporating of Ne
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Contents E. Industry Price Indices
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Contents Table 19.23 Manufacturing
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Foreword This Producer Price Index
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Preface The ILO, IMF, OECD, UNECE,
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Preface source (rather than requiri
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Preface tremendous concern with sam
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Preface among countries. However, t
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Preface Chapter 6 Chapter 7 Chapter
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Reader’s Guide International manu
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Reader’s Guide the System of Nati
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Abbreviations ABS ABS AF ANZIC ATM
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Abbreviations OLS Ottawa Group P C
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PART I Methods, Uses, and Coverage
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Producer Price Index Manual The exp
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Producer Price Index Manual B.1 Pri
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Producer Price Index Manual and qua
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Producer Price Index Manual D. The
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Producer Price Index Manual theoret
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Producer Price Index Manual Laspeyr
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Producer Price Index Manual C. Geog
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Producer Price Index Manual improve
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PART II Compilation Issues
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Producer Price Index Manual C. Appr
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Producer Price Index Manual Figure
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Producer Price Index Manual source
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Producer Price Index Manual prices
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5. Sampling Issues in Price Collect
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Producer Price Index Manual tory su
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Producer Price Index Manual D.1.2 C
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Producer Price Index Manual Table 5
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Producer Price Index Manual RESPOND
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7. Treatment of Quality Change A. I
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Producer Price Index Manual 7.12 Co
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Producer Price Index Manual current
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Producer Price Index Manual success
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Producer Price Index Manual (7.31b)
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9. PPI Calculation in Practice clud
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Producer Price Index Manual (a) Res
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Producer Price Index Manual 10. Rec
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Producer Price Index Manual USAGE C
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11. Errors and Bias in the PPI disp
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12. Organization and Management A.
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12. Organization and Management of
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12. Organization and Management det
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12. Organization and Management fou
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13. Publication, Dissemination, and
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14. The System of Price Statistics
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I 14. The System of Price Statistic
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15. Basic Index Number Theory 371 k
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15. Basic Index Number Theory 377 T
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15. Basic Index Number Theory 383 n
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15. Basic Index Number Theory 395 C
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15. Basic Index Number Theory 399 A
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16. Axiomatic and Stochastic Approa
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17. Economic Approach A. Introducti
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17. Economic Approach possibilities
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17. Economic Approach the numerator
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17. Economic Approach 17.28 The new
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17. Economic Approach ing flexible
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17. Economic Approach P W (p 0 ,p 1
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17. Economic Approach constraint, f
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18. Aggregation Issues A. Introduct
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18. Aggregation Issues (18.4) R 0 (
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18. Aggregation Issues (18.14) R(p
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18. Aggregation Issues 18.67 Howeve
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19. Price Indices Using an Artifici
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