Professors Introduce CPI Replacement

RESEARCH WITH IMPACT

The United States has used the consumer price index, or CPI, for more than a century to measure inflation and to calculate the economy’s “real” growth rate—output adjusted for inflation. Research conducted by Smeal faculty members Brent Ambrose and Jiro Yoshida reveals that the CPI is misleading as a measure of inflation.

Ambrose and Yoshida have devised an alternative method to measure inflation, the Penn State/ACY Alternative Inflation Index, which they say measures the change in prices in real time and would allow the CPI to be more accurate if it included their index. The two faculty members incorporate their Net Rent Index, which captures a different and superior measure of rental price changes based on marginal rents, into their index.

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