Modeling a Time Study of the United States Consumer Price Index from 2014 to 2023

Abstract

This study presents a comprehensive analysis of the U.S. Consumer Price Index (CPI) over a ten-year period 2014 to 2023. The CPI, a critical measure of inflation, reflects the average change in prices paid by urban consumers for a market basket of goods and services. This study will explore the intricate relationships between CPI and key economic variables, including unemployment levels, interest rates, and the sales index, using time series data and multiple regression analysis. The research identifies significant predictors of CPI and evaluates the extent to which these factors influence price levels in the U.S. economy. The findings reveal a strong positive correlation between CPI and interest rates, indicating that as borrowing costs increase, the CPI tends to rise correspondingly. Conversely, a negative relationship is observed between CPI and unemployment levels, suggesting that higher unemployment rates are associated with a decrease in CPI, possibly due to reduced consumer spending. The study also examines the sales index, finding a weaker yet notable relationship with CPI, which underscores the complex dynamics of consumer behavior and price levels. The analysis highlights the limitations of CPI as a comprehensive measure of the cost of living, pointing out its lack of significant correlation with real income and population growth. The study concludes that while CPI is an essential tool for measuring inflation and informing monetary policy, it may not fully capture the economic realities faced by the population. These insights suggest the need for policymakers to consider additional factors when using CPI to make informed decisions about economic policy and social welfare programs among the U.S. population.