History Of Consumer Price Index

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The consumer monetary value index ( CPI ) is measurement of the per centum alteration through clip in the cost of buying a changeless group of goods and besides services and it besides stand foring an mean form or index from the purchases made by the citizen in one specific period of clip. The Index is started since 1967 = 100 ( which is the based twelvemonth ) was the index for the Peninsular Malaysia while the Index for the twelvemonth 1980 is mentioning to Malaysia which means that the whole Malaysia. All the series of informations of the CPI are based on internationally accepted statistical process. Each of this series is follow the recommended categorization contained in the United Nations System of National Account ( SNA ) , 1968 that must be followed by every state in mensurating CPI. The most commonly methods or expression that been usage to analyse and roll up the information of CPI is Laspeyres, which is based on the point that are locally consumed reflecting the disbursement wonts of mean citizen. The points so been include in the Consumer Price Index is normally a necessity merchandise or the merchandise or services that been continuously used by the consumer. In anterior 2006 the goods and services were classified harmonizing to Classification of Household Goods and Services ( CHGS ) with the nine chief group which is Food, Beverage and Tobacco, Clothing and Footwear, Gross Rent Fuel & A ; Power, Furniture and Furnishing & A ; Household Equipment and Operation, Transportation and Communication, Recreation Entertainment Education and Cultural Services, and in conclusion is Assorted goods and services. These baskets of consumer merchandise have been alterations from CHGS to COICOP ( Classification of Individual Consumption Harmonizing to intent ) in twelvemonth 2006 until now and the extra group of merchandise has been change to twelve which is Alcohol and Non-Alcohol Food and Drink and Routine Household Maintenance, others are remained changeless.


This survey conducted to analyze what is the causal relationship between economic variable and Malayan CPI. The chief intent of this research is to uncover the relationship of economic variables impact towards the CPI for the last five old ages. The consumer monetary value Index or CPI is the general and major index that explained the alterations in retail monetary value paid by the family for goods and services. CPI measures the alterations in the general degree of monetary values of a fixed basket of goods and services which represents the points which are usually consumed by an mean family in Malaysia with mention to the base period. The CPI is designed to supply a wide step of alterations in retail monetary values experienced by Malayan families as a group and should non be expected to precisely reflect the experience of any single family. Therefore it will maintain alterations depending on the many factors that will act upon it. The economic variable that been research in this survey is rising prices rate, Exchange rate, Palm oil, Money Supply and besides Consumer Price Index. This research wants to uncover what is the variable that will hold the relationship with Consumer monetary value Index. Although the bing research provides some support links between the economic variable and CPI there is demand for extra research.


Consumer Price index is one of the major index in one state because of itaa‚¬a„?s explained the mean general monetary value of consumer merchandise in that state. This is of import because of its related with the efficiency of the state in pull offing the monetary value of the consumer merchandise that will stay alterations from clip to clip. Therefore it is really of import to understand what precisely the factors that lead to the alteration on the CPI and the methods to command the alterations. It is non good if a state have a higher consumer monetary value index comparison to the mean household income, it means that the family have a restraint in passing their money towards necessity merchandise. Therefore, in this research the chief point is to cognize which economic variables that will give an impact towards the consumer merchandise and the efficiency of the variable influence the CPI.

1.3 RESEARCH Question

In this survey, there are several research inquiries that has been developed sing the job statement occurred. The research inquiry of this research is:

1.3.1 To happen out the current status of the Consumer Price Index

1.3.2 To happen out the ground the fluctuation of Consumer Price Index

1.3.3 To place the consequence of the economic variable towards the consumer monetary value Index

1.3.4 To happen out the effects of the impact towards the state and family.

1.3.5 To name the ways to get the better of a big fluctuation of the Consumer Price Index.


Several surveies on CPI found that it is a common position that every state has a fluctuation on the Consumer Price Index. However, it can non be denied that some of the economic variable will impact the fluctuation of CPI and it are been prove by the past research that been found in the abroad survey. Therefore the chief intent of this survey is to cognize the impact of the economic variable that been used as a variables towards the Consumer Price Index.


There are several others factors that lead to the fluctuation or alterations on the consumer Price Index such as political determination devising, political stableness, and a authorities determination development program. In this survey we merely merely want to research on the economic variable that would give a immense impact towards the CPI, comparison to the others economic variables and the important of the impact.


The range of this survey would cover the consumer monetary value merchandise in Malaysia and the important alterations of the consumer merchandise monetary value. Following, this survey besides cover some of the economic variable that been choose as independent variables.

The clip skyline used in this survey is individual cross sectional where the economic variables may come from consumer monetary value index ( CPI ) , involvement rate, foreign exchange, Money supply and palm oil.


Time restraint has been encountered of all time since the survey has been started at the early semester 2011 until April 2011 therefore its trouble in order to administer questionnaire and have a respondent and acquire a feedback on CPI. The survey has been done by utilizing the information that been collected and besides the recent yesteryear back uping diary that have been done.

This survey is based on the informations collected from the secondary beginnings and besides the primary resources. The information been collected from the get downing January of the twelvemonth 2005 until December terminal 2010. The clip period of this research is for the 5 old ages.


1.8.1 CPI

CPI volumes represent the Consumer Price Index which is the mean general monetary value of consumer merchandise that been group in Malaysia.

1.8.2 Inflation rate

The rate at which the general degree of monetary values for goods and services is lifting, and, later, buying power is falling

1.8.3 Exchange Rate

The monetary value of one state ‘s currency expressed in another state ‘s currency. In other words, the rate at which one currency can be exchanged for another

1.8.4 Money Supply

The full measure of measures, coins, loans, recognition and other liquid instruments in a state ‘s economic system.

1.8.5 Palm oil

Palm oil is the current monetary value of the Palm Oil in states.

1.9 Summary

Consumer monetary value index is one of the major index that been see in measure the status of one state. There are a few other index that can been utilize to measure one state such as the condemnable instances, population, economic and others variable but the most preferred indexs is CPI because its related with the consumer which is the client and monetary value which is resources and leads to the gross. So it is of import to command CPI at the same time with the family income because of its have a negative correlativities. This survey will analyze the impact of economic variable towards the CPI. Few economic variables are taken to prove whether there are any important correlativity between the dependant and independent variables.

Chapter 3


3.0 Introduction

The aims of this survey are to happen the correlativity between the economic variables and impact towards the consumer monetary value index. Specifically, this survey is determined which variable is have a immense impact towards the motion of the CPI. Therefore by making this research we can precisely acquire the true information on the motion of the consumer monetary value index instead than do premise based on the ain political orientation. To accomplish the aim of survey, several trial have been use to acquire the consequence of the variable. Example of the trial that wants to be done is T-Test, F aa‚¬ ” Test and Multiple Regressions. The trial has been taking because of it will give a clear and crystalline position on the consequence and its unsophisticated compared to others prove that more complicated. This trial besides have been supported by the hypothesis based on the apprehension on the issued that been research or discuss. The hypothesis is the early premise on the consequence that will go on at the terminal of the survey.


Data concerning on the historical of CPI and the economic variables were gathered to see whether there are any correlativity between the dependant and all those independent variables.

The secondary informations will be collected from the past recent diary sing this survey. The survey or research have been develop by the foreign people or state, but the variable is non the same but still similar. The diary that been used is merely for support the consumer monetary value index state of affairs.

3.2 Sampling Frame

To procure an acceptable consequence, this survey decided to utilize 5 economic variables from others economic variables and the information is collected for 5 old ages and in monthly footing.

3.3 Beginnings OF DATA

The information on the dependent variables CPI was collected from the Malaysian Department of Statistic and the informations are updated until December 2010 which is on the current updated. The information is in Malayan Ringgit ( RM ) . Following for the independent variables the informations are been collected from the DataStream which is for Inflation Rate in per centum ( % ) , Exchange rate in Malayan ringgit ( RM ) , Money Supply in Malaysian Ringgit ( RM ) , and in conclusion for the palm oil is still in the Malayan Ringgit ( RM ) . The informations have been collected from January 2005 until December 2010 and by utilizing monthly informations footing.


The variables used in this survey can be categorized into two chief types which are the dependant and the independent variables.

3.4.1 Dependent Variables

The dependant variable for this survey is the Consumer Price Index which will be measured in footings of mean general degree of monetary value that been group under COICOP.

3.4.2 Independent Variables

For this survey, there are four independent variables that will be measured. There is the rising prices rate, exchange rate, Money Supply and Palm Oil


This research is designed to research the relationship between dependant and independent variables. In this survey, it engages in hypotheses proving that will explicate the certain important correlativities between economic variables and the determination of traveling public.

3.5.1 Purpose of the Study

The intent of this survey is to find the causal relationships between economic variable and CPI or want to cognize the impact of the economic variable towards the CPI.

3.5.2 Types of Probe

This survey involved the correlativity types of probe which is want s to probe the relationship between the variables whether have a strong relationship, semi strong relationship, weak relationship and in conclusion is no relationship with the variables.

3.5.3 Unit of Analysis

In this survey, Consumer Price Index, Exchange Rate, Inflation rate, Money Supply, Palm Oil Price.

3.5.4 Time Horizon

This survey will utilize monthly footing informations from twelvemonth January 2005 until December 2010


There is a classical theory that explained the high correlativity between the economic variable factors influence the fluctuation of the Consumer Price Index

Dependent variable: Consumer Price index

Independent variables: Inflation rate, exchange rate, Money Supply and Palm Oil Price.

Harmonizing to the conventional diagram above, it can be elaborated that the Consumer Price Index are determine by the rising prices rate, Exchange Rate, Money Supply and Palm Oil Price.


The statistical tools use in the survey is Multiple Linear Regression Model. This theoretical account of analysis is done to analyze the coincident effects of several independent variables on a dependant variable that is interval scaly. In other used since is can explicate the correlativity between the dependant and independent variable. By utilizing this correlativity we can place which variable will impact most on the dependant variable. This equation is one of the method that easier to utilize and understand.


Consumer Price Index motion can be influenced by many factors. The alterations in these CPI may significantly alter the disbursement of consumer and family. The consumer monetary value index may besides be consequence by others external factors that canaa‚¬a„?t be measures by utilizing the information as an illustration political, authorities program, and condemnable instances that are happens and increase from clip to clip. Therefore, there is of import to do the hypothesis before makes a research and concept a determination. This hypothesis is conveying a general premise the impact of the economic variables towards the consumer monetary value index.

Hypothesis 1

H0: rising prices rate is a chief subscriber of the increasing in oil monetary value.

Hypothesis 2

H0: exchange rate is non a chief subscriber to the alterations in general degree of monetary value.

Hypothesis 3

H0: Money supply besides a subscriber to the motion of the Consumer Price Index degree.

Hypothesis 4

H0: Palm Oil is non a chief subscriber to the alterations in mean degree of consumer monetary value Index.

3.8 Summary

In the nutshell, this chapter will supply the research design that will be used in this survey. The survey aims to find the relationship between economic variable factors and the consumer monetary value index. This research will be done in conformity to the aim where to cognize whether there is any important relationship between the economic variable factors with the mean general monetary value of CPI. This information will possibly can be used by the family, private and public sector, for them to do a program in the current general consumer monetary value Index. Since survey focal points on the information from 2005 until 2010, if would give a better image on the motion of the historical CPI until current monetary value influence by positive relation economic factors.