5 Deflation and aggregation 315
315 Chapter 5 Deflation and aggregation Price indices are compiled for two different purposes: firstly, to provide measures of the year to year movement of specific price levels (e.g. the rise or decline of con- sumer prices), and secondiy to "deflate" aggregates. Chapter 6 is devoted to the first problem, and chapter 5 to the second. lt is not surprising that in general an index formula is not able to serve both purposes equally well and we should therefore re- gard the two major uses of Index numbers (measurement of price levels and deflation of aggregates respectively) as two distinct topics in index theory, each of which has a "logic" of its own.1 There are also some mathematical properties of index functions, like "aggregative consistency" and (to be kept distinct) "structural consistency" that turn out to be of particular importance in the context of deflation and give rise to some additional "axioms".2 This chapter also deals with international recommenda- tions concerning the deflation of specific aggregates in National Accounts,3 and once more with the so called "ideal index" of Irving Fisher. 5.1 Introduction to deflation methods The focus of this section is to show what deflation aims at, and the methods that can be used to this end. There are several approaches to deflation and their sultability depends an the type of aggregate to be deflated. a) Objectives and types of deflation The Operation called "deflating" or "deflation" is usually defined as isolating the vol- ume component (that...
You are not authenticated to view the full text of this chapter or article.
This site requires a subscription or purchase to access the full text of books or journals.
Do you have any questions? Contact us.Or login to access all content.