<abstract xmlns="http://www.w3.org/1999/xhtml"><p>The consumer price index (CPI) is acommon measure of inflation. Similarly to the harmonised index of consumer prices (HICP), it is determined using the Laspeyres index, thus data on the consumption of the basket of goods do not have to be current. The Laspeyres index, using weights only from the base period, may not reflect changes in consumer preferences that occurred in the studied year. This is the reason for the formation of the so-called substitution bias in the measurement of inflation. The aim of the article is to assess the impact of the level of innovativeness of a given country’s economy on the occurrence of the substitution effect. The empirical part of the article is based on basic innovation indices, i.e. the SII, IOI, and GII. The assessment of the relationship between the level of innovativeness and the scale of the substitution effect was carried out based on the methods of multidimensional statistical analysis (including cluster analysis, the PROFIT method).</p></abstract>

The consumer price index (CPI) is acommon measure of inflation. Similarly to the harmonised index of consumer prices (HICP), it is determined using the Laspeyres index, thus data on the consumption of the basket of goods do not have to be current. The Laspeyres index, using weights only from the base period, may not reflect changes in consumer preferences that occurred in the studied year. This is the reason for the formation of the so-called substitution bias in the measurement of inflation. The aim of the article is to assess the impact of the level of innovativeness of a given country’s economy on the occurrence of the substitution effect. The empirical part of the article is based on basic innovation indices, i.e. the SII, IOI, and GII. The assessment of the relationship between the level of innovativeness and the scale of the substitution effect was carried out based on the methods of multidimensional statistical analysis (including cluster analysis, the PROFIT method).

The Size of the Substitution Bias of Inflation Measurement in Relation to the Level of Innovativeness of The European Union’s Economies

Econometrics

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

The consumer price index (CPI) is acommon measure of inflation. Similarly to the harmonised index of consumer prices (HICP), it is determined using the...

The Size of the Substitution Bias of Inflation Measurement in Relation to the Level of Innovativeness of The European Union’s Economies

Published Online: Dec 26, 2018

Page range: 79 - 97

DOI: https://doi.org/10.15611/eada.2018.4.05

Keywords
inflation measurement, substitution bias, innovativeness, innovation indices, cluster analysis, PROFIT method

© 2018 Elżbieta Roszko-Wójtowicz et al., published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

The Size of the Substitution Bias of Inflation Measurement in Relation to the Level of Innovativeness of The European Union’s Economies

Published Online: Dec 26, 2018

Page range: 79 - 97

DOI: https://doi.org/10.15611/eada.2018.4.05

Keywordsinflation measurement, substitution bias, innovativeness, innovation indices, cluster analysis, PROFIT method

© 2018 Elżbieta Roszko-Wójtowicz et al., published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

Keywords
inflation measurement, substitution bias, innovativeness, innovation indices, cluster analysis, PROFIT method