Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/313732 
Year of Publication: 
2024
Citation: 
[Journal:] Review of Income and Wealth [ISSN:] 1475-4991 [Volume:] 71 [Issue:] 1 [Article No.:] e12682 [Publisher:] Wiley Periodicals, Inc. [Place:] Hoboken, NJ [Year:] 2024
Publisher: 
Wiley Periodicals, Inc., Hoboken, NJ
Abstract: 
A chained price index is said to suffer from chain drift bias if it indicates an overall price change, even though the prices and quantities in the current period have reverted back to their levels of the base period. The empirical relevance of this bias is well documented in studies that apply sub‐annual chaining to scanner data. There it is shown that stockpiling can lead to downward chain drift bias. The present paper draws attention to the fact that smoothing consumption causes substantial upward chain drift. In addition, this study introduces a stochastic simulation approach that is consistent with both, stockpiling and consumption smoothing. A “stress test” is conducted that examines whether rolling window variants of multilateral indices (GEKS, TPD, and GK) effectively curtail the chain drift problem.
Subjects: 
bias
chain drift
multilateral
price index
simulation
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by-nc-nd Logo
Document Type: 
Article
Document Version: 
Published Version

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