Dynamic cost of living index for storable goods

Vol: 
88/2019
Author name: 
Ueda K
Year: 
2019
Month: 
December
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.

Publication file: 

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