As I said, I'm not an economist, but I have an idea that inflation is some kind of statistic that can be calculated in many ways, with different weights on different kinds of products, and that the weights used are often a bit old fashioned, focusing more on products of last year than on products of next year. How do you measure a price index on PCs? Do you look at the price of a typical PC, price/GHz or price/Gflop? What about mobile phones - does the introduction of the iPhone increase prices of typical phones, or is the iPhone regarded as "increase in supply of goods and services" relative to other phones?
It was all much easier in the days where the price of wheat or the price of oil was decisive. Today, oil prices can change a lot, and many people don't change how they consume.
As far as I see it, retrospective inflation indexes based on ever changing products can be used for hysteresis loops in the economic figures, providing constant economic growth without making life better for the population. There are many other problems with inflation indexes, and I'm sure that economists can pull out many books about this topic.
So, what kind of inflation index should the ECB provide? |
