tag:blogger.com,1999:blog-2198942534740642384.post2953920124071119229..comments2023-10-24T03:16:41.009-07:00Comments on Econometrics Beat: Dave Giles' Blog: Price Indices From Regression ModelsDave Gileshttp://www.blogger.com/profile/05389606956062019445noreply@blogger.comBlogger2125tag:blogger.com,1999:blog-2198942534740642384.post-19890120446877406712011-04-16T09:08:24.992-07:002011-04-16T09:08:24.992-07:00Guan - thanks for the very pertinent comment. You&...Guan - thanks for the very pertinent comment. You're absolutely right, of course. Implicit price deflators, such as the implicit GDP deflator, raise issues beyond those associated with simple Paasche and Laspeyres indices. You definitely didn't sleep through that class!Dave Gileshttps://www.blogger.com/profile/05389606956062019445noreply@blogger.comtag:blogger.com,1999:blog-2198942534740642384.post-51114771613198979842011-04-16T08:59:28.974-07:002011-04-16T08:59:28.974-07:00Caveat: I learned this stuff in an undergrad cours...Caveat: I learned this stuff in an undergrad course many years ago that I mostly slept through.<br /><br />“Of course, it’s the fact that an index measures only relative changes over time that enables us to ‘re-base’ (change the base year) an index without losing any information at all.”<br /><br />This is correct, but I don’t think it fully captures now a Paasche index is used in the context of GDP deflators, the price indices associated with GDP figures. At least before the introduction of chain-weighted indices, real GDP is not by calculating nominal GDP and deflating by a separately developed price index.<br /><br />Instead, nominal GDP and real GDP are measured directly. Suppose you choose 2005 as the base year. You then calculate nominal GDP in 2010 and then compute real GDP by multiplying 2010 quantities with 2005 prices. The implicit GDP deflator is nominal GDP divided by real GDP. For this reason, rebasing real GDP will usually lead to restatements of past GDP growth when goods and services change dramatically.<br /><br />Of course, once you have computed real GDP for every year since 1933 or whenever you started doing this, you will have a complete price index series, and you can re-base (in your sense) this series to make the value for any year equal to 100. But this is different than the re-basing (maybe that’s not the right term?) used for GDP deflators.<br /><br />I know that the US Census Bureau now focuses on chain-weighted price indices, but many countries still use the traditional method.Anonymousnoreply@blogger.com