Conference Paper

Construction of the Dubai Consumer Price Index in the Time of Coronavirus Pandemic

Date

March, 2021

Topic

E. Macroeconomics and Monetary Economics

The spread of the coronavirus has led to sweeping changes in the way households work, spend their time and shop, resulting in different shopping patterns and rapid price changes in some goods and services. The Dubai/UAE governments imposed strict measures on the movement of individuals which resulted in containing the virus and saved lives, but also triggered a slowdown in vital economic sectors. Though people’s purchasing habits have changed quickly while the basket of goods and services used to calculate the consumer prices index remained the same. These restrictions on business activities left a profound impact on consumer behavior and the interpretation of the CPI.  There are notable challenges with producing consumer price statistics during the Dubai/UAE lockdown. These large fluctuations of shares in relative expenditures have a profound impact on data collection and calculation of the consumer price index.  This paper discusses the Dubai Consumer Price index. Currently, the index is slated to adopt a 2019 basket reference year no earlier than 2021, which will already be badly outdated because of the pandemic when it is introduced. The next basket reference year would normally be 2024, when the pandemic will be over. It would make better sense to have a special survey for 2022, which would be the new basket reference year. The Dubai CPI would, breaking with tradition, be revised backward to 2020 incorporating the 2022 basket. Going forward, the Dubai CPI would continue to have its basket updated every five years, with revision of earlier years. The 2024 basket could be implemented going back to 2024, or to 2023 if the UAE economy had fully recovered by then. After that, the Dubai CPI would be calculated as much as possible following the mid-year basket approach. While this is not ideal, it is the most appropriate approach for a city like Dubai with limited resources for inflation measurement. As we are living in an information era, the paper proposes that the Dubai Statistics Center examines different modes of collecting data to produce alternative measures for the consumer price index.  By doing that the DSC and its data users would be able to evaluate the biasedness of the conventional measure of the CPI during the lockdown.  To better calculate the consumer price inflation during the coronavirus pandemic, the paper recommends that Dubai Statistics Center examine calculating a chain index with a formula that satisfies the time reversal property. This can be either the Edgeworth-Marshall formula or a superlative formula (Fisher, Tornqvist or Walsh.)
Construction of the Dubai Consumer Price Index in the Time of Coronavirus Pandemic

Speakers

Emad B. Mansour

Independent Statistics Consultant