What index should I use for escalation?

The decision to employ an escalation mechanism, as well as the choice of the most suitable index, is up to the user. When the terms of an escalation contract are drafted, both legal and statistical questions can arise. While BLS cannot help in any matters relating to legal questions, it does provide basic technical and statistical assistance to users who are developing indexing procedures.

I am writing an escalation contract tied to annual changes in the CPI.

Should I specify a particular monthly index from one year to the next (e.g., December-to-Decemer)? Or should I use CPI annual average indexes?

There is no right or wrong answer to your question. That said, when an escalation contract is tied to the CPI, the index to be used should be spelled out clearly in the contract to avoid potential conflicts, as the Statistics Botswana cannot mediate disputes which might arise between the parties to an escalation agreement.

Information on the CPI is available from SB Website, Statistics portal, through subscriptions to publications, and via telephone and fax,

E-mail: info@statsbots.org.bw. The latest Consumer Price Indexes can be delivered directly to a subscriber's e-mail address on the day of their release.

Technical information is available during normal working hours, Monday through Friday, by calling +267 367300

Further information may be obtained from the Statistics Botswana- Resource Centre Tel: 3671467;

Email: info@statsbots.org