The CPI-U-RS is adjusted for these two improvements in the shelter component from 1991 to 1995 by using an experimental Laspeyres consumer price index (called the CPI-U-XL) in place of the CPI-U for both residential rent and owners' equivalent rent.(12) The CPI-U-XL, published for years beginning in 1991, employs the post-1994 estimation formulas for both shelter indexes.
Specifically, for those CPI-U categories that now use a geometric-mean formula, the CPI-U-RS substitutes price changes from the CPI-U-XG for the period 1991-98.
Second, some improvements to the CPI-U, for which no adjustments were made to the CPI-U-RS, may nevertheless have affected the rate of inflation, as measured by the CPI-U.
For example, while the price changes for the CPI-U-XG were used to adjust most CPI item categories from 1991 to 1998, the CPI-U-RS was adjusted downward from 1978 to 1990 by the average differences between the CPI-U and CPI-U-XG from 1991 to the mid-1990s.
Over the 21-year period of the study (December 1977 to December 1998), the CPI-U-RS increased 141.2 percent, compared with 163.9 percent for the CPI-U over the same period; the annualized difference between the two measures is approximately 0.45 percent.
The difference between the all-items indexes of the CPI-U and CPI-U-RS changed markedly over time.
A large proportion of the difference between the CPI-U and CPI-U-RS can be explained by the rental equivalence adjustment applied from 1978 to 1982 and by the group of adjustments made to reflect changes over time to all CPI formulas.
Rental equivalence was first incorporated into the CPI-U in 1983, and its incorporation into the CPI-U-RS from 1978 to 1982 largely explains the sizable difference between the CPI-U and CPI-U-RS daring that period.
Estimated effect on annual Inflation rate of specific methodological changes, selected periods Average annual rate Index of type of effect 1978-82 1983-86 1987-97 1998 CPI-U 9.46 3.15 3.50 1.61 Effect of incorporating an estimate of rental equivalence from 1978 to 1982 -.86 ...
The difference between the CPI-U and CPI-U-RS for the food-and-beverages group is driven by the geometric-mean adjustments made to the CPI-U-RS; the group was not affected by the other adjustments.