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To: LLCF who wrote (88507)	4/2/2001 8:34:02 AM
From: Ilaine	Respond to of 436258

Are you sure you're thinking about GDP and not CPI? Because the BLS uses hedonic adjustments to GDP as a deflator, not an inflator.

To: LLCF who wrote (88507)	4/2/2001 9:24:47 AM
From: Ilaine	Read Replies (1) \| Respond to of 436258

>>How widespread and important is the use of hedonic techniques? The use of hedonic price indexes is increasing, and the components that are deflated by hedonic techniques account for 18 percent of GDP. For most of these components, the impact of using hedonic techniques is small because the matched models used earlier picked up most of the quality changes. For example, the introduction of hedonic price indexes by BLS slightly raised the rate of price increase for VCR's and for rent but slightly lowered it for televisions. The main area in which the use of hedonic price indexes has had a large impact is in computers and peripheral equipment, whose quality-adjusted prices have been falling at an average annual rate of about 24 percent in recent years. In 1998, the components for which hedonic price indexes were used contributed a negative 0.2 percentage point to the 1.3-percentage-point increase in the GDP price index; however, among these components, computers and peripheral equipment contributed a negative 0.4 percentage point and thus more than accounted for the negative contribution.<< http:// www.bea.doc.gov/bea/ARTICLES/BEAWIDE/2000/1200hm.pdf