Two issues are addressed in this paper. First, we explore the issue of price index invariance in the linearized Almost Ideal demand system. We establish that the Stone index, which lacks invariance, and the recently proposed invariant Laspeyres, Paasche and Tornqvist indices all generate biased...

The fact that the famous price index of Laspeyres is unable to pass the so called inversion test (IT) gave rise to the idea that this formula tends to measure "spurious inflation" which renders it useless and fallacious. In the IT prices and quantities of n goods, relating to two periods, the...

The correlation between persistent changes in the markup in one sector of an economy and the inflation rate is quantified in a 2-sector dynamic general equilibrium model. How this relationship is affected by monetary policy is also studied. We find that the correlation is in general positive...

Looking closely at the PPP argument, it states that the currencies purchasing power should not change when comparing the same basket goods across countries, and these goods should all be tradable. Hence, if PPP is valid at all, it should be captured by the relative price indices that best fits...

This paper studies the relative performance of alternative monetary policy rules in the presence of oil price shocks in a small open economy optimizing model. Our analysis shows that it is important to distinguish between alternative price indices (CPI, core CPI, and GDP deflator) when modeling...

In the standard repeat-sales method, the maintained assumption is that the quality does not change between a house?s two sale dates. This assumption has been called into question. In particular quality changes from renovations carried out between a house?s two sales are not accounted for in the...

PWT 7.0 data deviate substantially from PWT 6.3 data because the benchmarked prices for 1970 to 1996 used in PWT 6.3 were entirely discarded. PWT 7.0 data are unreliable and appear to be much less accurate than PWT 6.3 data.