The Massachusetts Institute of Technology has launched an internet-based resource to measure price changes from around the world and to give real-time inflation estimates.
In what is called the Billion Prices Project, MIT’s researchers monitor more than 5 million prices of items sold by online retailers from around the world, as well as computing inflation statistics on a daily basis.
The price data collected are from categories such as food and beverages, household products, electronics, apparel, and real estate. MIT tracks prices in more than 50 countries and currently publishes data for a smaller subset of countries, including the US, the UK, Argentina, Australia, Brazil, Chile, China, Colombia, France, Italy, Turkey, and Venezuela.
According to Professor Roberto Rigobon of the MIT Sloan School of Management, the project provides pricing data at much greater speed than conventional inflation indices, but also in greater detail across countries. MIT’s inflation indices also offer a real-time indicator of economic conditions, says Rigobon.
“We’ve been tracking prices for three years and were able to detect very clearly when the U.S. recession began and when it ended,” he says. “Our US average online price index started to dramatically drop only two days after Lehman Brothers went bankrupt in September of 2008 and we were able to see prices recovering in early January 2009, well before a trend could be seen in official CPI announcements.”
Rigobon adds that this type of data also is helpful in countries where the official inflation statistics are unreliable. MIT has been publishing alternative inflation estimates for Argentina since 2008, for example, and its index has become a widely used measure of inflation there. MIT estimates that annual inflation in Argentina is over 20%, compared to the government’s official figure of around 11%.
In the UK, by contrast, while the official rate of retail price inflation is 4.5% and the consumer price index is growing at 3.1% a year, MIT’s latest estimate of price inflation is barely positive, at 0.5% per annum.
In addition to providing inflation estimates, Rigobon also are using the data to conduct research on areas such as price-stickiness, price adjustments to shocks, the relationship between asset and retail prices, sales strategies, and premiums paid for green or organic products around the world.
The Billion Prices Project, says Rigobon, represents “a breakthrough innovation in the field of inflation statistics and is a great opportunity to conduct economics research that was impossible before. We want to improve the way inflation is measured and reported. Our data provides the right level of detail and relevance required to not only track official statistics, but also forecast future trends.”
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