How to do price indexing?

[Mohamud Hussein]

Hi members,

I would like to adjust a price variable (p) for inflation and quality change over 4 year period from Feb. 2010 to Jan. 2015. My datset is an unbalanced panel identified by a panel id ( SKUcode) and month of purchase (m). I collected data for the relevant price index and re-referenced this to Feb. 2010 (as =100).

For those of you who may wish to know more about the index used it is Laspayers index used by the UK Office of National Statistics. Data for re-referenced index is copied below (see last column).

Question: how I can write and run a code allowing me to adjust price variable for inflation?

Thanks,
Mohamud

2010 FEB	123.3	100
2010 MAR	123.1	99.8
2010 APR	123.5	100.2
2010 MAY	122.7	99.5
2010 JUN	122.3	99.2
2010 JUL	123.2	99.9
2010 AUG	123.4	100.1
2010 SEP	123.9	100.5
2010 OCT	123.8	100.4
2010 NOV	125	101.4
2010 DEC	126.9	102.9
2011 JAN	126.4	102.5
2011 FEB	128.3	104.1
2011 MAR	127.1	103.1
2011 APR	127.8	103.6
2011 MAY	129.1	104.7
2011 JUN	131	106.2
2011 JUL	131.4	106.6
2011 AUG	132.2	107.2
2011 SEP	131.9	107.0
2011 OCT	130.9	106.2
2011 NOV	133	107.9
2011 DEC	133.5	108.3
2012 JAN	133.7	108.4
2012 FEB	133.9	108.6
2012 MAR	134.9	109.4
2012 APR	134.3	108.9
2012 MAY	135.5	109.9
2012 JUN	134.7	109.2
2012 JUL	134.5	109.1
2012 AUG	134.3	108.9
2012 SEP	134.9	109.4
2012 OCT	135.2	109.7
2012 NOV	136.4	110.6
2012 DEC	138.9	112.7
2013 JAN	137.9	111.8
2013 FEB	139.4	113.1
2013 MAR	138.1	112.0
2013 APR	138.7	112.5
2013 MAY	139	112.7
2013 JUN	140.1	113.6
2013 JUL	141	114.4
2013 AUG	140.9	114.3
2013 SEP	141.9	115.1
2013 OCT	142.2	115.3
2013 NOV	142	115.2
2013 DEC	142.4	115.5
2014 JAN	141.5	114.8
2014 FEB	142.6	115.7
2014 MAR	142.6	115.7
2014 APR	142.3	115.4
2014 MAY	140.8	114.2
2014 JUN	140.9	114.3
2014 JUL	141	114.4
2014 AUG	141.1	114.4
2014 SEP	141.7	114.9
2014 OCT	140.1	113.6
2014 NOV	139.1	112.8
2014 DEC	139.8	113.4
2015 Jan	140.8	114.2

[Svend Juul]

If -price- is the unadjusted price and -index- the price index, calculate the adjusted price -price_a- with:

generate price_a = price/index

[Nick Cox]

Usual spelling is Laspeyres. Svend has the answer in one line, but for related technique see http://www.stata-journal.com/sjpdf.h...iclenum=dm0055

[Jorrit Gosens]

I think the bigger problem with this question is how to populate the column 'index' with the right index values: individual observations may not be one each for each of the months specified in this list. I dont know how to do this but am interested. I would usually do this in a spreadsheet before importing to stata.

[Nick Cox]

Jorrit: You could put the price index in a dataset and merge on the monthly date variable (not column!). Or type the numbers into the observations for one complete panel and copy them elsewhere.

 
bysort m (index) : replace index = index[_n-1] if missing(index)

[Mohamud Hussein]

Many thanks all.

Svend, if I use the command line suggested the prices is adjusted by scale factor of 100; see my index referenced

Would your command line need to be adjusted is slightly as:


generate price_a = price*100/index


Thanks, Mohamud

[Svend Juul]

You are absolutely right, Mohamud,

Svend