Publication: The Value of Data: An Estimate of the Cost of (Not) Updating Brazil’s Consumer Price Index
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2023-09-01
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2023-09-27
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Consumer price indices are central to monitoring, guiding, and defining a country's economic development path. By capturing how prices change over time, consumer price indices provide a measure of the evolution of the cost of living for households. The impact of price indices on the economy is very broad, affecting everything from the adjustment of pensions to the monetary policy of the Central Bank, from cash transfer programs to private sector contracts. The measurement of inflation has, therefore, real consequences for the country's evolution. In this note, authors study the Brazilian case and focus on the potential fiscal implications of the unavailability of a household budget survey in a timely manner. The note presents two hypothetical exercises that vary the timing at which the national statistical office incorporates updated information from a household budget survey into the CPI. Varying the timing of adoption of the expenditure information allows to create a counterfactual price index that can be compared to the true CPI at different points in time. Finally, using the actual and counterfactual CPI we answer the following question: what would have been the government expenditures should the CPI update have been delayed The note focuses on expenditures on pensions (aposentadorias) due to data availability. Recognizing that there are many other government policies that depend on inflation estimates, the estimates presented can be interpreted as a lower bound of the effect of interest.
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“Vale, Ricardo; Conceicao, Otavio; Lara Ibarra, Gabriel. 2023. The Value of Data: An Estimate of the Cost of (Not) Updating Brazil’s Consumer Price Index. Poverty and Equity Notes; September 2023. © World Bank. http://hdl.handle.net/10986/40407 License: CC BY-NC 3.0 IGO.”
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