Policy Viewpoints

How Accurate is Egypt's Consumer Price Index?

Publication Number: ECES-PVP1-E&A

October, 1997

Author : Ahmed Galal and Hala Fares

Type : Policy Viewpoints

There is no question that policy makers, producers, workers and consumers care about the accuracy and reliability of the consumer price index (CPI), the most common measure of inflation. This is true in developed and developing countries both for very good reasons. Inaccurately reporting high inflation could, among other things, cause central banks to impose tighter than necessary monetary policies in an effort to maintain low interest rates and encourage investment; lead to a devaluation of currency in an effort to maintain a competitive exchange rate and improve a country’s exports; and trigger a higher increase in wages than justified by productivity to prevent erosion in the cost of living. Inaccurately reporting low inflation could similarly lead to unjustified policy change.