Measurement of Chain Drift in the Chained CPI‐U

Joshua Klick

Abstract

Chained price indexes may drift from fixed base indexes as price change occurs over time. Fixed base indexes may not exhibit drift, but the weights are susceptible to being less representative than the weights of chained indexes. This paper introduces basic price index concepts including chain drift and weight representivity and uses Bureau of Labor Statistics (BLS) Consumer Price Index (CPI) data to demonstrate that high levels of weight representivity and low levels of index chain drift can co-exist for the superlative Tornqvist formula.