Decomposing the Changes of the Divisia Price Index: Application to Inflation in the Philippines | Zendy

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Decomposing the Changes of the Divisia Price Index: Application to Inflation in the Philippines

Author(s) -

Tomoki Fujii

Publication year - 2011

Publication title -

ssrn electronic journal

Language(s) - English

Resource type - Journals

ISSN - 1556-5068

DOI - 10.2139/ssrn.1806989

Subject(s) - divisia index , inflation (cosmology) , economics , index (typography) , price index , consumer price index (south africa) , wholesale price index , producer price index , monetary economics , econometrics , macroeconomics , price level , keynesian economics , monetary policy , mathematics , statistics , mid price , computer science , energy (signal processing) , physics , theoretical physics , world wide web , energy intensity

We propose a method to decompose the logarithmic change of the Divisia price index into the pure price effect, the prefernce effect and the substitution effect. Our empirical results in the Philippines shows the effects of preference change on the Divisia price index are heterogeneous but positive across all regions and income deciles. However, they are dominated by the pure price effect.

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