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Henning Ahnert

25 May 2004
In this paper we review the well-known problem of how to measure price developments when the quality of the underlying goods and services is changing over time. The importance of appropriate methods to take account of quality change is highlighted from the perspective of monetary policy. In particular, we highlight the need for credible and transparent price indicators. In this context, we review the hedonic approach to calculating quality-adjusted price indices and assess the available information on their effects as well as their potential for improving credibility and comparability. Current practices as regards quality adjustment in the European Union (EU) are also discussed, with particular emphasis on the Harmonised Index of Consumer Prices (HICP). Overall, we give a qualified endorsement of hedonics for specific product categories and make some suggestions about how the work on quality adjustment in the EU can be further developed, focusing in particular on the role of hedonics.
JEL Code
C10 : Mathematical and Quantitative Methods→Econometric and Statistical Methods and Methodology: General→General
C18 : Mathematical and Quantitative Methods→Econometric and Statistical Methods and Methodology: General→Methodological Issues: General
C43 : Mathematical and Quantitative Methods→Econometric and Statistical Methods: Special Topics→Index Numbers and Aggregation
E31 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Price Level, Inflation, Deflation
22 July 2020
Expert Group on Linking Macro and Micro Data for the household sector
The Expert Group on Linking Macro and Micro Data for the household sector (EG-LMM) was established in December 2015 within the European System of Central Banks (ESCB) with the aim of comparing and bridging macro data (i.e. National Accounts/Financial Accounts) and micro data (i.e. the Household Finance and Consumption Survey) on wealth. Furthermore, the Expert Group also focused on developing distributional results for household macro balance sheets, starting with national data from the euro area Member States. The Expert Group assessed the extent to which these two sets of statistics could be compared and was able to link most balance sheet items. Since, following adjustments, the estimates yielded from the micro data were still lower than the macro data, an estimation method was developed to gross up the micro data to be in line with the macro data results. The methodology delivers estimates of the distribution of household wealth that are closely aligned with Financial Accounts aggregates, thereby offering valuable new information for the purposes of macroeconomic analyses based on such Financial Accounts. Further research is needed to examine the robustness of these results and to improve the estimation method taking into account country-specific features and information. The Expert Group has therefore recommended further work be undertaken with a view to compiling experimental distributional results by end-2022.
JEL Code
D31 : Microeconomics→Distribution→Personal Income, Wealth, and Their Distributions
G51 : Financial Economics