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Finance and Economics Discussion Series
Finance and Economics Discussion Series logo links to FEDS home page Inflation Measurement
David E. Lebow and Jeremy B. Rudd

Abstract: Inflation measurement is the process through which changes in the prices of individual goods and services are combined to yield a measure of general price change. This paper discusses the conceptual framework for thinking about inflation measurement and considers practical issues associated with determining an inflation measure's scope; with measuring individual prices; and with combining these individual prices into a measure of aggregate inflation. We also discuss the concept of "core inflation," and summarize the implications of inflation measurement for economic theory and policy.

Keywords: Index numbers, price indexes, cost-of-living index

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Last update: November 21, 2006