Syllabus for Constant-Quality Price Indices

A price index should measure a pure price movement over time. In practice, however, goods and services change over time, and this can contaminate a price index—without additional information, there is no way to disentangle a price movement from a change in the quality of a good or service.

The goal of this module is to touch on some advanced topics in the construction of price indices, with a particular focus on quality adjustments and missing data. By the end of the module, an individual should:

  1. Be familiar with the need to make quality adjustments in a price index, and the link with missing data.

  2. Understand the importance of stratification for constructing a price index.

  3. Have a basic understanding of price indices that use econometric methods to deal with quality changes.

This module is useful for compilers of price indices with an understanding of the basic theory and construction of a price index, and who would like to get a deeper understanding of how to deal with quality adjustments and missing data.

This module consists of self-directed readings, along with an assignment. In total, about 10 to 15 hours should be devoted for this module

Prerequisites: Price Index Theory, at least one introductory course in econometrics. An advanced course in econometrics or probability and statistics is helpful.

Evaluation for this module is based on an assignment consisting of 20 multiple-choice/true-false questions that draw on material in the course content and readings. Collaboration on the assignment is welcomed, but each person must submit their own unique work. Passing this module requires at least a 65% on the assignment.

Readings for this module come from chapters 17 and 21 of the PPI manual (ILO et al. 2004b) and/or the CPI manual (ILO et al. 2004a), published by the IMF (freely available on their website), as well as chapters 4–6 in the Handbook on Residential Property Price Indices (ILO et al. 2013), published by Eurostat (freely available on their website).29

Please email one of the course instructors (either Steve Martin or Shaoxiong Wang or Anastasiia Nosach) if you have any questions, or need help with any of the course material or assignment.

  1. Although the focus of the handbook is on residential property prices, the ideas are applicable to any goods or services, and the material is presented relatively well.↩︎