Consumer Price Index (CPI) is the price index for consumer goods and services in an economy. It is used to track the increase in prices of consumer goods and services over time.Consumer inflation is defined as :
CPI index is used to deflate many economic time series to remove the effect of increase in price level. Sometimes we want to express the deflated time series in different base year than the base year of the CPI index. In that case, we have to reindex the CPI. The mechanism for rebasing the historical series of CPI is:
For instance, in the following table, the second column shows the CPI index for Nepal expressed at 2014/15 base year. We want to rebase the series at 2000/01 and 2018/19 as base years.
CPI Index for 1972/73 at 2000/01 as base year is :
FY
|
CPI Index (2014/15=100)
|
Inflation
|
CPI Index (2000/01=100)
|
Inflation
|
CPI Index (2018/19=100)
|
Inflation
|
1972/73
|
3.0
|
8.1
|
2.5
|
|||
1973/74
|
3.6
|
18.5
|
9.6
|
18.5
|
3.0
|
18.5
|
1974/75
|
4.2
|
16.7
|
11.2
|
16.7
|
3.5
|
16.7
|
1975/76
|
4.1
|
-0.7
|
11.1
|
-0.7
|
3.5
|
-0.7
|
1976/77
|
4.3
|
2.7
|
11.4
|
2.7
|
3.6
|
2.7
|
1977/78
|
4.7
|
11.2
|
12.7
|
11.2
|
4.0
|
11.2
|
1978/79
|
4.9
|
3.4
|
13.2
|
3.4
|
4.1
|
3.4
|
1979/80
|
5.4
|
9.8
|
14.4
|
9.8
|
4.5
|
9.8
|
1980/81
|
6.1
|
13.4
|
16.4
|
13.4
|
5.1
|
13.4
|
1981/82
|
6.7
|
10.4
|
18.1
|
10.4
|
5.6
|
10.4
|
1982/83
|
7.7
|
14.2
|
20.6
|
14.2
|
6.4
|
14.2
|
1983/84
|
8.2
|
6.2
|
21.9
|
6.2
|
6.8
|
6.2
|
1984/85
|
8.5
|
4.1
|
22.8
|
4.1
|
7.1
|
4.1
|
1985/86
|
9.8
|
15.8
|
26.5
|
15.8
|
8.2
|
15.8
|
1986/87
|
11.2
|
13.3
|
30.0
|
13.3
|
9.3
|
13.3
|
1987/88
|
12.4
|
10.8
|
33.2
|
10.8
|
10.3
|
10.8
|
1988/89
|
13.4
|
8.3
|
36.0
|
8.3
|
11.2
|
8.3
|
1989/90
|
14.7
|
9.7
|
39.4
|
9.7
|
12.3
|
9.7
|
1990/91
|
16.1
|
9.8
|
43.3
|
9.8
|
13.5
|
9.8
|
1991/92
|
19.5
|
21.1
|
52.4
|
21.1
|
16.3
|
21.1
|
1992/93
|
21.2
|
8.9
|
57.1
|
8.9
|
17.8
|
8.9
|
1993/94
|
23.1
|
8.9
|
62.2
|
8.9
|
19.4
|
8.9
|
1994/95
|
24.9
|
7.7
|
67.0
|
7.7
|
20.8
|
7.7
|
1995/96
|
26.9
|
8.1
|
72.4
|
8.1
|
22.5
|
8.1
|
1996/97
|
29.1
|
8.1
|
78.3
|
8.1
|
24.3
|
8.1
|
1997/98
|
31.5
|
8.3
|
84.8
|
8.3
|
26.4
|
8.3
|
1998/99
|
35.1
|
11.4
|
94.4
|
11.4
|
29.4
|
11.4
|
1999/00
|
36.3
|
3.4
|
97.6
|
3.4
|
30.4
|
3.4
|
2000/01
|
37.2
|
2.4
|
100.0
|
2.4
|
31.1
|
2.4
|
2001/02
|
38.3
|
2.9
|
102.9
|
2.9
|
32.0
|
2.9
|
2002/03
|
40.1
|
4.7
|
107.8
|
4.7
|
33.5
|
4.7
|
2003/04
|
41.7
|
4.0
|
112.0
|
4.0
|
34.9
|
4.0
|
2004/05
|
43.6
|
4.5
|
117.1
|
4.5
|
36.4
|
4.5
|
2005/06
|
47.1
|
8.0
|
126.5
|
8.0
|
39.3
|
8.0
|
2006/07
|
49.8
|
5.9
|
133.9
|
5.9
|
41.7
|
5.9
|
2007/08
|
53.2
|
6.7
|
142.9
|
6.7
|
44.5
|
6.7
|
2008/09
|
59.9
|
12.6
|
160.9
|
12.6
|
50.1
|
12.6
|
2009/10
|
65.6
|
9.6
|
176.3
|
9.6
|
54.8
|
9.6
|
2010/11
|
71.9
|
9.6
|
193.1
|
9.6
|
60.1
|
9.6
|
2011/12
|
77.8
|
8.3
|
209.2
|
8.3
|
65.1
|
8.3
|
2012/13
|
85.5
|
9.8
|
229.8
|
9.8
|
71.5
|
9.8
|
2013/14
|
93.3
|
9.1
|
250.6
|
9.1
|
78.0
|
9.1
|
2014/15
|
100.0
|
7.2
|
268.7
|
7.2
|
83.6
|
7.2
|
2015/16
|
109.9
|
9.9
|
295.4
|
9.9
|
91.9
|
9.9
|
2016/17
|
114.8
|
4.4
|
308.6
|
4.4
|
96.0
|
4.4
|
2017/18
|
119.6
|
4.2
|
321.4
|
4.2
|
100.0
|
4.2
|
CPI Index for 1972/73 at 2000/01 as base year is :
Likewise the CPI index for 1995/96 expressed at 2000/01 as base year is :
It is worth-noting that the denominator during this conversion process remains the same (CPI index from the old series taken as base year).
To confirm whether the rebasing is correct or not, we can calculate the rate of inflation as the percentage change in the CPI series for each base year. If the rate of inflation is same, we are done.
..............................................................................................................................................................................
Download the excel file for the above conversion here.
No comments:
Post a Comment