Tradable and nontradable inflation indexes: replicating New Zealand's tradable indexes with BLS CPI data.

Tradable goods and services--goods and services that can be sold in a location, typically another country, different from where they were produced--are, theoretically, sold at the same price wherever they are sold. Tradable goods and services are characterized by lower inflation relative to nontradable goods and services --goods and services whose price depends on where they are sold. Almost universally, goods are tradable and services are nontradable, though there are exceptions. This article uses new tradable and nontradable indexes to confirm that the goods and services that make up the market basket upon which the U.S. Consumer Price Index is based follow the tradable-versus-nontradable pattern. In particular, tradable market basket items are found to have lower inflation than nontradable ones over the 6-year period examined. [ABSTRACT FROM AUTHOR]

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