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October 1998, Vol. 121, No. 10
Incorporating a geometric mean formula into the CPI
Kenneth V. Dalton
Associate Commissioner, Prices and Living Conditions, Bureau of
John S. Greenlees
Assistant Commissioner, Consumer Prices and Price Indexes, Bureau of Labor
Kenneth J. Stewart
Economist, Division of Consumer Prices and Price Indexes, Bureau of
Beginning in January 1999, a new geometric mean formula will replace the
current Laspeyres formula in calculating most basic components of the Consumer Price
Index. The new formula will better account for the economic substitution behavior of
consumers. This article describes an important improvement in the
calculation of the Consumer Price Index (CPI).
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