Keywords: Index numbers, price indexes, cost-of-living index
Abstract: Inflation measurement is the process through which changes in the prices of individual
goods and services are combined to yield a measure of general price change. This paper
discusses the conceptual framework for thinking about inflation measurement and considers
practical issues associated with determining an inflation measure's scope; with measuring
individual prices; and with combining these individual prices into a measure of aggregate
inflation. We also discuss the concept of "core inflation," and summarize the implications
of inflation measurement for economic theory and policy.
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Last update: November 21, 2006