The statistical price index as an approximation of the constant-utility price index: an empirical analysis using Japanese data sets

It is well known that there is a gap between the constant-utility price index based on consumer demand theory and the official Consumer Price Index (CPI) published by the Statistics Bureau. In this paper, as a benchmark to determine the constant-utility price index, the Almost Ideal Demand (AID) System utility function is assumed to be a true utility function. Our findings suggest that the constant-utility, the Laspeyres and the Törnqvist price indices calculated from the SNA data sets show similar movement, while the official CPI differs. In order to improve the accuracy of the official CPI, it should include agricultural and single households in the survey design. J. Japanese Int. Economies19 (1) (2005) 37-50.