The Impact on the CPI of Not Surveying House Prices in Rural Regions: A Sensitivity Analysis - ARCHIVED

Articles and reports: 62F0014M1997008
Description: In light of a recent change in population coverage, this study was initiated to determine whether the integrity of the Consumer Price Index (CPI) should be questioned on the grounds that it does not explicitly take into account rural house price movements. An attempt is made here to quantify the potential impact, using various regimes of artificial data to represent house price movements for rural regions. The regimes were manufactured in a way that allowed the analysis of differences between urban and rural regions in terms of the evolution of house prices, as well as differences in their cumulative price index levels. Three provinces were considered: Newfoundland, Saskatchewan, and British Columbia, all of which have large rural populations. The study results were monthly indexes for the time period, January 1986 to December 1994. The general conclusion was that house prices in rural regions would have to move very differently from those in urban regions to affect the overall level of the CPI. However, in the case of lower-level aggregates the failure to include rural house prices could be having an important effect. In addition, even when cumulative house price movements for rural and urban regions are similar, differences in their evolution tend to have an effect on the trend of the CPI, especially in the case of lower-level aggregates. While it is tempting to conclude that the current CPI methodology is robust enough to apply to the expanded population, this would be based purely on conjecture about the nature of movements in rural house prices. Hence, a second phase of this study will be initiated, whose purpose will be to develop a methodology to construct price indexes for rural regions.
no: 8
Issue Number: 1997008
Frequency: Occasional
Author(s): Markle, Terri
Main Product: Prices Analytical Series
Format Release date More information
PDF May 13, 1999

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