How High Interest Rates Harm Innovation
Monetary policy decisions can have meaningful long-term effects.
How High Interest Rates Harm InnovationCBR Briefing #82
- September 05, 2019
- CBR - Economics
Inflation is lower online than in brick-and-mortar stores
- Inflation is lower online, according to an index created by Chicago Booth’s Austan D. Goolsbee and Stanford’s Peter J. Klenow that monitors e-commerce in the same way the Consumer Price Index tracks sales at conventional stores.
- Using data from millions of online transactions gathered by Adobe Analytics, the researchers built the Digital Price Index to match as many CPI categories as possible. Between 2014 and 2017, inflation for online goods was at least 1 full percentage point lower every year than inflation for equivalent goods in the CPI.
- The researchers also analyzed the massive turnover in goods offered online, where 44 percent of sales were for products that did not exist in the previous year, and 24 percent were for products that disappeared from the market the following year.
- Factoring in these prices, they find online inflation decreased even more—another 1.5–2.5 percentage points per year overall.
Austan D. Goolsbee and Peter J. Klenow, “Internet Rising, Prices Falling: Measuring Inflation in a World of E-Commerce,” Working paper, June 2018.
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