Scanner Data and the Measurement of Inflation

This paper outlines the potential use of bar-code scanner data from retailers for the measurement of inflation. The source benefits from its extensive coverage in providing data on prices, quantities and values of transactions of each model of a good sold. Relative weights can thus be ascribed to price changes in both base and current months at a highly detailed level which allows us to estimate substitution bias. Methods of adjusting for quality changes can be considered. The dummy variable hedonic approach is compared with a superlative, exact hedonic approach and a matching technique akin to that used by statistical offices