Owen J. Shoemaker (2004) "Analysis of Divergence between Chained CPI-U and Regular CPI-U for the All_US-All_Items Indexes (2000-2002)."
In February 2004, the BLS calculated and published its third annual set of C-CPI-U indexes for the 12 months of 2002. The C-CPI-U (Chained Consumer Price Index - Urban) is calculated and published every year, with a one-year lag, using a Tornqvist formula, and its set of weights are updated yearly so that a unique set of monthly weights are available for both time t as well as for time t-n. The C-CPI-U can thus be labeled a "superlative" index. By contrast the Regular CPI-U uses weights that are, at a minimum, at least two years old, and uses a combination (hybrid) of Geomeans and Laspeyres formulas as its final estimator. The set of All_US-All_Items Chained C-CPI-U index results continue to diverge (lower) from Regular CPI-U index results. We investigate the nature of this divergence. We also analyze the two different weight structures, possible response biases, and the standard errors that we calculate for these indexes.
Last Modified Date: July 19, 2008