COVID-19 and the CPI: Is Inflation Underestimated?

November 5, 2020

Preview Citation

Format: Chicago

Marshall B Reinsdorf. COVID-19 and the CPI: Is Inflation Underestimated?, (USA: International Monetary Fund, 2020) accessed November 18, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

COVID-19 changed consumers’ spending patterns, making the CPI weights suddenly obsolete. In most regions, adjusting the CPI weights to account for the changes in spending patterns increases the estimate of inflation over the early months of the pandemic. Under-weighting of rising food prices and over-weighting of falling transport prices are the main causes of the underestimation of inflation. Updated CPI weights should be developed as soon as is feasible, but flux in spending patterns during the pandemic complicates the development as quickly as 2021 of weights that represent post-pandemic spending patterns.

Subject: Consumer price indexes, COVID-19, Health, Housing, Inflation, National accounts, Prices, Transportation

Keywords: Base period, Budget share, Consumer Price Index, Consumer price indexes, COVID-19, CPI, CPI compiler, CPI database, CPI weight, Expenditure pattern, Housing, Inflation, Inflation measurement, Items CPI, Southern Europe, Transportation, WP

Publication Details

Pages:

30
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2020/224
Stock No:

WPIEA2020224
ISBN:

9781513560281
ISSN:

1018-5941

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