CPI Bias in Korea

Chul Chung (), Bonggeun Kim () and Myung-Ho Park ()
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Chul Chung: Korea Institute for International Economic Policy
Bonggeun Kim: Sungkyunkwan University
Myung-Ho Park: Korea Institute of Public Finance

East Asian Economic Review, 2007, vol. 11, issue 2, 261-282

Abstract: We estimate the CPI bias in Korea by employing the approach of Engel's Law as suggested by Hamilton (2001). This paper is the first attempt to estimate the bias using Korean panel data, Korean Labor and Income Panel Study(KLIPS). Following Hamilton's model with non­linear specification correction, our estimation result shows that the cumulative CPI bias over the sample period (2000-2005) was 0.7 percent annually. This CPI bias implies that about 21 percent of the inflation rate during the period can be attributed to the bias. In light of purchasing power parity, we provide an interpretation of the estimated bias.

Keywords: CPI Bias; Engels Law; AIDS Estimation (search for similar items in EconPapers)
JEL-codes: D10 D12 E31 (search for similar items in EconPapers)
Date: 2007
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Persistent link: https://EconPapers.repec.org/RePEc:ris:eaerev:0150

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