OECD welcomes Chile’s plan to improve Consumer Price Index | WPN World People News

The OECD welcomes Chile’s plan to improve the way it calculates the Consumer Price Index (CPI). The plan focuses primarily on proposals by the Chilean Statistical Office (INE) to better capture price changes for clothes and footwear, to ensure that the CPI accurately reflects inflation. The proposals are in line with recommendations from the OECD at the time of Chile’s accession to the Organisation in 2010, and in its follow-up review of Chile’s statistical system and statistics two years after the country’s accession in 2012.

At the request of INE, the OECD Statistics Directorate has reviewed proposed methodological changes to better capture price fluctuations for clothes and footwear. Price changes in these segments of the CPI are thought to have been understated over the past few months, which gave rise to significant public debate in Chile.

In a Note commenting the proposed changes, the OECD :

Confirms the difficulty of pricing of clothing and footware. Seasonality of products and fashion imply that items disappear and do not return in the following year. Dealing with non-replacement of items requires imputations and sophisticated judgements on comparability with new items. The OECD supports the improvements envisaged by INE with regard to the treatment of fashion items and seasonality. In addition, the OECD suggests testing an alternative method for imputation of missing items, that has become standard practice in many OECD countries.

Recognises that over the past years INE has improved its CPI in this area, and that further improvements are planned. The OECD supports longer-term plans in the area of footwear and clothing, such as adopting a ‘checklist’ and the use of ‘hedonic’ methods.

Recommends that these changes be part of a broader, well-communicated plan of CPI developments. International best practice suggests that sufficient time needs to be taken to prepare, test and review new methods and their results before full implementation. The OECD notes that an implementation plan has been established and disseminated by INE.

The OECD review of Chile’s proposed revision to CPI methodology was carried out in association with the French National Statistical Office (INSEE).

Source: Organization for Economic Co-operation and Development