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  • 1.  Inflation and Consumer Price Index on https://www.bls.gov/data/

    Posted 06-05-2017 08:41
    Hi ASA Community:

    On the Bureau of Labor Statistics data download port, I was hoping to find historical information on inflation rates in the United States over the past 50 years.  When I clicked on the link for "Inflation and Prices", none of the download choices contained the inflation rate.  The only choices were the CPI (Consumer Price Index) and PPI (Producer Price Index).   Does anyone know why these two indices are in the inflation section, rather than the inflation rate itself?

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    Regards,
    Brandy R. Sinco
    Statistician and Programmer/Analyst, UM School of Social Work
    Current Projects: 
    Mon, Wed, Fri CHW Integration/REACH; 
    Tues, Thurs  RISE/WCBT


  • 2.  RE: Inflation and Consumer Price Index on https://www.bls.gov/data/

    Posted 06-06-2017 10:28
    Inflation is the change in the price index.  See Inflation - Wikipedia for a fuller explanation, including calculations.  When working with these indices, you have to be aware of how they are calculated.  The three main indices in use are Laspeyres, Paasche and Fisher. Laspeyres holds base period quantities constant, so it overstates inflation because it does not account for substitution effects. Paasche holds future period quantities constant, so it understates inflation because substitution effects are overstated. Fisher, the square root of the product of Laspeyres and Paasche, has shown itself to be a good compromise.

    BLS uses Laspeyres, so its indices consistent overstate inflation.  BEA uses the Fisher index because of its quality.  BEA refers to its indices as "chain type price indices" because it calculates its indices on a rolling basis.

    Laspeyres and Paasche have the advantage of being additive: "real" values created by dividing (or deflating) "nominal" (i.e., observed) values by these indices are additive.  The Fisher index lacks this property, which can be vexing for macroeconomic modelers.

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    Chuck Coleman
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