Research Discussion Paper – RDP 2018-08 Econometric Perspectives on Economic Measurement

Contents

• Introduction
• The Standard Model Needs Changing
• Index Numbers Share Econometric Foundations
• The New Framework Challenges Some Practices
• Conclusion
• Appendix A: The Inconsistency Arising from Endogenous Weighting is a Linear Projection
• Appendix B: Loosening Strict Error Exogeneity Introduces Another Avenue for Weights to Generate Inconsistency
• Appendix C: The Model of Voltaire and Stack (1980) Equates to The Diewert Model, under Restrictive Conditions Only
• Appendix D: Some Choices of f (x), {U_tv}, and {quality_tv} are Always Equivalent
• Appendix E: The Dutot Index Has an Unexpected Interpretation
• Appendix F: The Method of Moments Makes Sensible Multilateral Index Functions
• References

For their input I thank Bert Balk, Anthony Brassil, Jan de Haan, Michele De Nadai, Denzil Fiebig, Kevin Fox, SeoJeong (Jay) Lee, Alicia Rambaldi, John Simon, Franklin Soriano, and participants at several seminars and conferences. Rosie Wisbey sourced some elusive materials. This work forms part of my PhD at the University of New South Wales and was supported by an Australian Government Research Training Scholarship. The views expressed in this paper are those of the author and do not reflect those of the Reserve Bank of Australia. Any errors are my own.