Dynamic Cost of Living Index for Storable Goods
16 Pages Posted: 12 Dec 2019
Date Written: December 10, 2019
Abstract
Consumers hold inventory for future uses. This study investigates how such intertemporal decisions influence the cost-of-living index (COLI). To this end, I construct a simple dynamic model, in which goods are storable and nonresalable, and prices take either high (regular price) or low values (sales). I then introduce two types of dynamic COLIs. Simulation results show that neither index satisfies both monotonicity and the time reversal test.
Keywords: consumer inventory, cost-of-living index, price index
JEL Classification: C43, D15, E31
Suggested Citation: Suggested Citation
Ueda, Kozo, Dynamic Cost of Living Index for Storable Goods (December 10, 2019). CAMA Working Paper No. 88/2019, Available at SSRN: https://ssrn.com/abstract=3501932 or http://dx.doi.org/10.2139/ssrn.3501932
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