Weighting bias and inflation in the time of Covid-19: Evidence from Swiss transaction data
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Date
2020-07-07
Publication Type
Working Paper
ETH Bibliography
yes
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Abstract
Sharp changes in consumer expenditure may bias inflation during the Covid-19 pandemic. Using public data from debit card transactions, I quantify these changes in consumer spending, update CPI basket weights and construct an alternative price index to measure the effect of the Covid-induced weighting bias on the Swiss consumer price index. I find that inflation was higher during the lock-down than suggested by CPI inflation. The annual inflation rate of the Covid price index was -0.4% by April 2020, compared to -1.1% of the equivalent CPI. Persistent “low-touch” consumer behaviour can further lead to inflation being underestimated by more than a quarter of a percentage point until the end of 2020.
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Publication status
published
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Journal / series
Volume
35
Pages / Article No.
96 - 115
Publisher
Centre for Economic Policy Research
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Edition / version
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Software
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Date created
Subject
Organisational unit
06331 - KOF FB Konjunkturumfragen / KOF Business Tendency Surveys
02525 - KOF Konjunkturforschungsstelle / KOF Swiss Economic Institute