South Korea Consumer Price Index

KRCPI is the raw consumer price index recorded without transformation, the monthly index-number level (2020 = 100) that measures the average change over time in the prices a representative household pays for a fixed basket of consumer goods and services.

This level is computed as a base-period-quantity-weighted aggregate, and because the weights are held fixed across the entire comparison, movements in the index reflect price change alone rather than shifts in basket composition (Laspeyres 1871).

The current-period-weighted counterpart and the ideal index that is the geometric mean of the two bound the fixed-base level from above and below, and this ideal index satisfies the time- and factor-reversal tests (Paasche 1874; Fisher 1922). The expenditure-share-weighted log-change form gives the superlative approximation against which the fixed-basket level is read (Törnqvist 1936).

The quantity the index ultimately approximates is the true cost-of-living index, the expenditure ratio that holds household utility fixed (Konüs 1939). This target is made precise within the four-approach taxonomy of index-number theory (Diewert 2002). The economic approach in that taxonomy is grounded in the exact and superlative aggregators (Diewert 1976).

Because the basket is held fixed, the level departs from the cost-of-living target by the substitution and quality-change wedge and by measurement bias (Diewert 1998; Boskin et al. 1996). The axiomatic consistency the construction does satisfy belongs to the test-approach lineage (Balk 1995).

The headline level reported here preserves the full price distribution rather than the supply-shock-robust central tendency of core inflation (Eckstein 1981).

KRED applies no transformation to KRCPI, loading the published index level as recorded with only a date parse and a reshape into the long store. It therefore performs no re-indexing, deflation, smoothing, annualizing, or year-over-year differencing.

The measurement basis by which the level comes to exist is fixed-basket aggregation, where a base-period expenditure survey fixes the quantity weights and the elementary price relatives are combined into the all-items index anchored at 2020 = 100 (Laspeyres 1871).

The construction sits within the index-number framework whose alternatives are the current-weighted index, the symmetric ideal index, and the expenditure-share log-change index (Paasche 1874; Fisher 1922; Törnqvist 1936). The last two are the superlative formulas that are exact for flexible aggregators (Diewert 1976).

The four conceptual routes to the same number are the fixed-basket, test, stochastic, and economic approaches (Diewert 2002). The axiomatic properties this level satisfies are characterized within the test approach (Balk 1995). The cost-of-living concept it targets is defined as the expenditure ratio that holds utility fixed (Konüs 1939).

The gap between the fixed-base level and that economic target consists of substitution bias and broader measurement bias, and because the series is served exactly as measured, KRED does not correct it (Diewert 1998; Boskin et al. 1996).

A core variant formed by excluding the most volatile components would correspond to the underlying-inflation concept, but the headline index here applies no such exclusion (Eckstein 1981).

As a measure of consumer prices, the index is the empirical counterpart of the cost-of-living concept, and its use as the operational target of price stability turns on how closely a fixed-basket level tracks that concept (Konüs 1939).

The headline reading economic agents respond to is a known upward-biased proxy for welfare-relevant inflation. The fixed-base Laspeyres level overstates true cost-of-living growth by a substitution wedge, and the combined commodity-substitution, outlet, quality-change, and new-goods bias widens that wedge (Diewert 1998; Boskin et al. 1996).

For monetary-policy purposes the headline level is routinely decomposed into a persistent component and transitory noise. This separation is framed as trend plus transitory disturbance plus bias, and was originally defined as the core rate on the economy's long-run growth path (Cecchetti 1997; Eckstein 1981).

The supply-shock robustness of that underlying signal is supplied by the limited-influence estimators and the optimally trimmed means (Bryan and Cecchetti 1994; Bryan, Cecchetti, and Wiggins 1997). The core component is identified as the part of measured inflation with no long-run effect on real output (Quah and Vahey 1995).

The trend extracted from the same series by the unobserved-components stochastic-volatility model is the slow-moving inflation objective against which policy is calibrated (Stock and Watson 2007). The harmonized-index-as-inflation-target reasoning explains why a single consumer price level can anchor expectations across the economy (Diewert 2002).

On this site the headline CPI feeds the expected-inflation and real-rate constructions as the published level rather than any superlative reweighting (Diewert 1976).

For asset pricing the consumer price level is the deflator that converts nominal cash flows into real terms, and index-number theory formalizes this operation through the time- and factor-reversal tests that a deflator should satisfy (Fisher 1922). The base-quantity weights, their current-weighted dual, and the expenditure-share log-change form bound the deflation error (Laspeyres 1871; Paasche 1874; Törnqvist 1936).

Inflation-linked bonds, inflation swaps, and breakeven quotes settle on the realized path of exactly this headline level. The substitution and quality-change wedge attributed to a fixed-base index is priced into the basis between indexed and nominal instruments (Diewert 1998; Boskin et al. 1996).

Because the level the market indexes to is not the superlative cost-of-living target, the convexity and seasonality of the published index, rather than a smoothed economic index, drive carry on linkers (Diewert 1976, 2002). Axiomatic consistency governs whether successive vintages chain coherently for settlement (Balk 1995).

For relative-value and macro positioning the persistent component matters more than the monthly print, so traders read the headline against the underlying-inflation gauges and the trend (Cecchetti 1997; Bryan and Cecchetti 1994; Stock and Watson 2007). The cost-of-living anchor frames the long-horizon real-return target (Konüs 1939).

On this platform the same headline level enters the ex-ante and ex-post real-rate series and the inflation-surprise series, where it is the published input to the Fisher decomposition rather than a reweighted index.

KRCPI is published as a not-seasonally-adjusted consumer-price index level, and the appropriate statistical object is its logarithm, which is expected to be integrated of order one. The sample is 437 monthly observations spanning 1990-01 to 2026-05, and the unit-root triplet is fitted on the log level with a constant and trend.

The augmented Dickey-Fuller regression of Dickey and Fuller (1979), in the lag-augmented form of Said and Dickey (1984), does not reject the unit root at p = 0.245, and the stationarity-null test rejects trend stationarity at p < 0.01 (Kwiatkowski et al. 1992), so the augmented Dickey-Fuller and KPSS legs concur on an I(1) reading. The nonparametric test of Phillips and Perron (1988) is the sole dissenter, rejecting the unit root at p = 0.0048, which is the documented Phillips-Perron over-rejection toward spurious stationarity under near-unit moving-average errors rather than independent evidence of stationarity (Ng and Perron 2001), so no clean order of integration is assigned and the concurring reading is I(1).

Because the log level is not a clean stationary object, the portmanteau and the break search are run on its first difference, since a level portmanteau on a near-unit-root index reads mechanical near-unit autocorrelation and a level mean-break search spuriously segments a stochastic trend (Perron 1989; Hamilton 2018). The portmanteau statistic of Ljung and Box (1978), refining the form of Box and Pierce (1970), rejects the white-noise null on the differenced log level at p = 0.000, and the multiple-break procedure of Bai and Perron (1998), computed by the dynamic-programming algorithm of Bai and Perron (2003), locates a single break in the mean of the differenced series at 1998-03.

Seasonal tests are appropriate on this unadjusted monthly index. The seasonal-unit-root test of Hylleberg et al. (1990), with the monthly mechanics of Beaulieu and Miron (1993), rejects unit roots at the seasonal frequencies at p = 0.000, while the seasonal dummies are jointly significant at p = 0.000, so the seasonality is present and deterministic rather than stochastic, consistent with the stationary-seasonality reading of Canova and Hansen (1995) and with the not-seasonally-adjusted character of the series (Ghysels and Osborn 2001).