A metropolitan transaction-based commercial price index: A time-varying parameter approach

This study examines the usefulness of time-varying parameter techniques for constructing reliable transaction-based commercial price indices for metro politan areas. Time-varying parameter techniques allow the implicit prices of differing quality characteristics to vary intertemporally, overcoming th e potential bias imposed by holding implicit prices fixed and simply interp reting time dummy variables as in a conventional hedonic approach. This pap er empirically investigates three time-varying parameter methods (Chained, Laspeyres, and Paasche) and considers the potential for sample selection bi as, Precision measures are constructed to examine the reliability oi the re spective indices.