Overview

This course gives a modern and straightforward introduction to prices indices. The focus is on the main ideas and concepts that are important for both users and compilers of price indices; consequently, the course is not encyclopedic, and several important topics are either given a quick treatment, or not covered at all. Many references are provided to complement the material in this course, and extend the scope of the topics covered. Overall the course rests firmly in the area of theory, and is designed to help foster an understanding of what a price index is. Several practical examples using the R programming language are given throughout the course, along with several applied exercises. But most of the more “real world” aspects of making a price index are ignored. This is not because these things are not important; rather, it is difficult to appreciate these more practical topics without a firm grasp of the theory.

The course is broken into four modules that build on each other. The first module gives an introduction to price indices, focusing mainly on the computational aspects of a price index. The second module gives a broad introduction to the theory of price indices, with a focus on motivating the price indices that get produced by national statistical agencies. The third module covers quality adjustments, one of the main practical hurdles when building a price index. The fourth modules brings everything together with an extended exercise to build and analyze a price index with R.

Not all modules are needed to gain an understanding of price indices, and the material in this course can be used by learners with a variety of backgrounds and objectives. In all cases the first module should be the starting point, as it provides a basic introduction without delving too deep into the mathematical theory.

Those interested primarily in the computational aspects of a price index can take module 4 after module 1, skipping the more theoretical material in modules 2 and 3. This sequence is appropriate for individuals with little to no prior knowledge of economics or statistics, and who do not need to use a price index for analytic work.

Those with some prior exposure to economic theory can take module 2 after module 1 to gain a deeper understanding of the material in module 1, followed by module 4 to put these ideas into practice. This sequence is appropriate for those that use price indices for analytic work.

Individuals with prior exposure to econometrics and statistics can take module 3 after module 2 to learn about some practical challenges when building a price index, followed again by module 4. This sequence is appropriate for those that both use and build price indices, as it gives the foundational tools required to design a price index.