B. Peter Pashigian (2001) "The Used
Car Price Index: A Checkup and Suggested Repairs."
The Bureau of Labor Statistics (BLS) has published the
used car price index since December 1952 as part of the
Consumer Price Index (CPI). As its 48th birthday approaches,
the used car price index merits a timely review for at least
two reasons. First, compared to the new car price index, the
used car price index is akin to an ignored stepchild,
receiving less scrutiny but deserving of more attention.
Second, there are nagging doubts and misgivings within the
BLS about accuracy of the used car price index. The
questionable behavior of the used car price index could be an
undesirable byproduct of the sampling procedures adopted by
the BLS. Or, could the source of the price information that
the BLS relies on be the culprit? What role has the treatment
of quality improvements played in explaining the suspect
behavior of the used car price index? While any or all of
these could be the underlying causes of the questionable
behavior and should not be slighted, could the observed
"excess" volatility of the used car price index be
a real phenomenon? Used car markets might have less elastic
supply curves and experience larger demand shocks compared to
those observed in the new car and other durable good markets.
This paper addresses these questions. Among the findings are
- The failure to adjust used car prices for quality
change between 1952 and 1987 helps explain why the
used car price index rose more rapidly than the new
car price index.
- Used car prices are among the more volatile in the
CPI. The source of the price data used by the BLS
appears to contribute to the excess volatility of the
used car price index.
Last Modified Date: July 19, 2008