Abstract
How important is quality adjustment in measuring consumer price inflation? Not so much when looking at German CPI microprice data, although our data set lacks some products that are typically adjusted for quality changes. In the euro area, we show that the use of heterogeneous quality adjustment practices across member states has a big impact on cross-country inflation differentials and distorts the level of inflation. Using scanner data for consumer and household electronics, we find that cross-country inflation differentials may be overestimated by about 0.5 percentage points, and the euro-area (Big Five) inflation rate may be overestimated by about 0.3 percentage points.
Authors
- Jan-Oliver Menz
- Elisabeth Wieland
- Günter W. Beck
JEL codes
- E31
- C43