Modelling the commodity prices in the OECD countries: a stochastic approach

This paper considers the modelling of commodity prices of consumer goods in the OECD countries. Given the prices of n commodities in two time periods t and t-1, {p(1t), p(2t),..., p(nt)} and {p(1t-1), p(2t-1),..., p(n,t-1)}, how should we use this information to measure the overall price growth, the rate of inflation and the change in the relative price of each commodity as well as their standard errors. We show how the stochastic approach to index numbers can be used for this purpose. (C) 2003 Elsevier Science B.V. All rights reserved.