Mexico uses a fixed-weight price index, or consumer price index (CPI), broadly similar in composition to the CPI used in the United States. When one sees a listing of annual inflation rates in Mexico, such as the one in the table below, it is usually based on the Mexican CPI (Banamex, 1993).
Source: Challenge, March-April, 1995
A fixed-weight price index measures how much a fixed basket of goods costs in each year relative to a based period.
Fixed-Weight Price Index = Value of a Fixed Basket at Current Prices
Value of a Fixed Basket at Base-Year Prices
In the United States, the Bureau of Labor Statistics constructs the CPI by sending out people each month to find the current prices of a fixed list or basket of consumer items, including food, clothing, and fuel. The CPI for that month is then calculated as the current basket of consumer items divided by the cost of the basket in the base year (Abel & Bernanke, 1992).
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