Application of Stochastic Index Numbers in Inflation Measurement – the Case of Poland

• Main Author: Jacek Białek
• Format: Article
• Language: English
• Published: Czech Statistical Office 2014-06-01
• Series: Statistika: Statistics and Economy Journal
• Subjects: Price indices; stochastic index numbers; price index theory
• Online Access: http://www.czso.cz/csu/2014edicniplan.nsf/engc/01003BF6F0/$File/32019714q2046.pdf

The stochastic approach is a specific way of viewing index numbers, in which uncertainty and statistical properties play a central role. This approach, applied to the prices, treats the underlying rate of infl ation as an unknown parameter that has to be estimated from the individual prices. Thus, the stochastic approach provils the whole probability distribution of inflation. In this paper we present and discuss several basic stochastic index numbers. We propose a simple stochastic model, which leads to a price index formula being a mixture of the previously presented specifi cations. We verify the considered indices on a real data set.