The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Inflation Measurement

  • David E. Lebow
  • Jeremy B. Rudd
Reference work entry


Inflation measurement is the process whereby changes in the prices of individual goods and services are combined to yield a measure of general price change. This article 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.


Aggregate price level definition Asset price measurement Cobb–Douglas functions Conditional cost-of-living index Constant elasticity of substitution Consumer price index Core inflation Cost-of-goods index Cost-of-living index Dynamic factor models ‘Exclusion’ measures of inflation Fisher index GDP price index Headline inflation Hedonic price functions Index numbers Indexation for inflation Inflation measurement Laspeyres index Lifetime utility Limited-influence measures of inflation Matched model price index Measurement error ‘Neo-Edgeworthian’ index Paasche index Quality-adjustment problem Reduced-form Phillips curve Rental equivalence Shadow prices ‘Stochastic’ approach to inflation measurement Törnqvist index Underlying inflation 

JEL Classifications

C43 E31 
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Copyright information

© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • David E. Lebow
    • 1
  • Jeremy B. Rudd
    • 1
  1. 1.