Search results for: Deflation
Brian Sturgess, World Economics, June 2017
Increasingly, national income statisticians, the specialists involved in producing real national income figures, and the users of those figures are living in a parallel universe. Most countries use an outdated and inaccurate method to estimate real Gross Domestic Product (GDP) by using what is termed single deflation. Best practice suggests using double deflation: one price index to deflate the prices of goods produced and another to deflate the value of intermediate goods used up in production. A recent study comparing single deflation calculations with double deflation official growth estimates for eight countries showed that, for some years, single deflation figures deviated up- or downwards from the official estimates by as much as 3–4 percentage points.
Masanaga Kumakura, World Economics, June 2015
Although Japan’s CPI is often criticized for potential upward bias, it deals with improvements in the quality of individual goods in ways that make the statistical inflation rate much lower than actual price changes. Moreover, the quantitative importance of this effect has risen progressively since the early 2000s due to increased weights of technology-intensive electronic products and changes in the method of adjusting their prices for quality improvement. Once this artificial effect is taken into account, it becomes questionable that Japan’s recent deflation has been so serious as to justify the adventurous monetary policy currently implemented by its central bank.
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