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Source: International Monetary Fund

COVID-19 and the CPI: Is Inflation Underestimated?

Author/Editor:

Marshall B Reinsdorf

Publication Date:

November 5, 2020

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Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary:

COVID-19 changed consumers’ spending patterns, making the CPI weights suddenly obsolete. In most regions, adjusting the CPI weights to account for the changes in spending patterns increases the estimate of inflation over the early months of the pandemic. Under-weighting of rising food prices and over-weighting of falling transport prices are the main causes of the underestimation of inflation. Updated CPI weights should be developed as soon as is feasible, but flux in spending patterns during the pandemic complicates the development as quickly as 2021 of weights that represent post-pandemic spending patterns.

Series:

Working Paper No. 20/224

Frequency:

regular

English

Publication Date:

November 5, 2020

ISBN/ISSN:

9781513560281/1018-5941

Stock No:

WPIEA2020224

Format:

Paper

Pages:

30

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