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New Zealand Association of Economists conference 2006
New goods and the Consumers Price Index

Author

Ricky Ho

Abstract

The appearance of new goods and services in the marketplace can present a significant issue for the compilation of the Consumers Price Index (CPI). As the New Zealand CPI uses a fixed basket approach, new goods are generally added only when the basket is reviewed and reweighed. The CPI is therefore subject to a form of potential measurement bias, called ‘new goods bias’, which increases with the delay in which new goods are introduced into the index.

This paper summarises the conceptual issues of new goods bias and describes the treatment of new goods in the New Zealand CPI. The paper also presents an empirical analysis of the potential impact on the index of the following:

  • the timing of the introduction of new consumer electronic goods to the CPI
  • the expenditure weights assigned to these items.

The goods examined include digital cameras, DVD player/recorders and flat panel televisions.

pdf icon. New goods and the CPI : An empirical analysis on the impact of when new goods are introduced into the index (PDF, 181KB)

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