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Abstract
New Quality Adjusted Price Indexes for Nonresidential Structures
by Bruce T. Grimm
Paper prepared for the IMF/BIS Conference on Real Estate Indicators and
Financial Stability, Washington, DC, October 27-28, 2003.
Accurate, quality adjusted prices for nonresidential structures are necessary
for a good understanding of the functioning of the economy. In order to
improve its estimates of nonresidential structures’ prices, the
Bureau of Economic Analysis (BEA) has developed new quality adjusted price
indexes for several types of nonresidential structures. The new indexes
will be incorporated into the comprehensive revision of the national income
and product accounts (NIPA’s) later in 2003. They are designed to
replace the existing price index estimates, which are constructed using
an indirect methodology. The new indexes are expected to be used only
until the Bureau of Labor Statistics introduces Producer Price Indexes
for nonresidential structures later in the decade. The price indexes are
based on hedonic regressions, and yield rates of inflation that are slightly
higher than those yielded by corresponding matched-model price index estimates
based on the same source data. Also, relative to the existing price indexes,
the new price indexes will slightly increase estimated rates of inflation
for nonresidential structures, beginning with 1998. BEA will use the new
price indexes to deflate related structure types within private nonresidential
structures and Federal and state and local government gross investment
in structures.
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Last changed:
October 1, 2003
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