BLS Handbook of Methods

In This Chapter

Chapter 15.
International Price Indexes

Index Construction

The import and export price indexes are of the Laspeyres type and use two aggregation methodologies. At the lowest level, items are weighted within establishment/detailed categories. These relatives are combined across establishments and then aggregated to lowest level stratum indexes.

where:

Pht is the price index at period t for lowest level stratum h,

wkt is the weight at period t of detailed product category k within stratum h,

wjt is the weight at period t of establishment j within detailed product category k,

wit is the weight at period t of item i within establishment j and detailed category k,and

pit/pi0 is the price relative of item i from period t to base period 0.

The weights used for the lowest level stratum indexes are based on data from several samples and are derived from the dollar values on the sampling frames, divided by the corresponding probabilities of selection determined by the sample design. Each establishment/detailed category pair (collectively, the "weight group") is considered to be a relatively homogeneous collection of items. Therefore, each set of items selected within a weight group also represents non-selected items within the weight group.

The index formula above is used for lowest level stratum price indexes as of January 1997. In prior years items were equally weighted within the detailed product category. Adding sampling weights at the item and company levels gives a more accurate measure than equally weighting because the true importance of the largest companies and their products is reflected in the sample design and the estimator.

At the next step, lowest level stratum indexes are aggregated to successive upper index levels.

where:

PHt is the price index at period t for upper level index H,

wht is the weight at period t of child4 index h,

Pht is the price index at period t for child index h.

The weights used for the upper level indexes are based on trade value figures compiled by the Bureau of the Census for the base year. Beginning with January 1997, the base year weights are from 1995 trade values. Price indexes from 1993 through 1996 use 1990 weights, indexes from 1985 through 1992 use 1985 weights, and data prior to 1985 use 1980 weights.

Footnotes
4A child stratum is at one less level of aggregation than index H.

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