IDEAS home Printed from https://ideas.repec.org/p/hcx/wpaper/0206.html
   My bibliography  Save this paper

Teaching Chain-Weight Real GDP Measures

Author

Listed:
  • Miles Cahill

    (Department of Economics, College of the Holy Cross)

Abstract

In 1996, the Bureau of Economic Analysis (BEA) changed the method used to calculate measures of real GDP from a Laspeyres or Paasche index to a Fisher ideal index, also called a chain-weight index. Even though this is a significant change in approach and has resulted in extensive revisions of reported statistics, many intermediate-level textbooks treat this topic casually, if at all. This article presents two applications in which this topic can be explored more thoroughly, with the help of spreadsheet software. One exercise introduces the concept of the chain-weight index by comparing it to Laspeyres, Paasche and ideal indexes with the use of utility analysis. The second exercise is a step-by-step process to calculate chain-weight index statistics.

Suggested Citation

  • Miles Cahill, 2002. "Teaching Chain-Weight Real GDP Measures," Working Papers 0206, College of the Holy Cross, Department of Economics.
    • Handle: RePEc:hcx:wpaper:0206
    as

    Download full text from publisher

    File URL: http://www.indiana.edu/~econed/pdffiles/summer03/cahill.pdf
    File Function: Final published version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. R. D. Rossiter, 2000. "Fisher Ideal Indexes in the National Income and Product Accounts," The Journal of Economic Education, Taylor & Francis Journals, vol. 31(4), pages 363-373, December.
    2. Amano, Robert A. & Wirjanto, Tony S., 1997. "An Empirical Study of Dynamic Labor Demand with Integrated Forcing Processes," Journal of Macroeconomics, Elsevier, vol. 19(4), pages 697-715, October.
    3. Miles Cahill & George Kosicki, 2000. "Exploring Economic Models Using Excel," Southern Economic Journal, John Wiley & Sons, vol. 66(3), pages 770-792, January.
    4. Diewert, W. E., 1976. "Exact and superlative index numbers," Journal of Econometrics, Elsevier, vol. 4(2), pages 115-145, May.
    5. Michael J. Boskin, 1998. "Consumer Prices, the Consumer Price Index, and the Cost of Living," Journal of Economic Perspectives, American Economic Association, vol. 12(1), pages 3-26, Winter.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Miles B. Cahill, 2003. "Teaching Chain-Weight Real GDP Measures," The Journal of Economic Education, Taylor & Francis Journals, vol. 34(3), pages 224-234, January.
    2. Huffman, Wallace, 2004. "Marketizing U.S. Production in the Post-War Era: Implications for Estimating CPI Bias and Real Income from a Complete-Household-Demand System," Staff General Research Papers Archive 11987, Iowa State University, Department of Economics.
    3. Patrick Bajari & Zhihao Cen & Victor Chernozhukov & Manoj Manukonda & Jin Wang & Ramon Huerta & Junbo Li & Ling Leng & George Monokroussos & Suhas Vijaykunar & Shan Wan, 2023. "Hedonic prices and quality adjusted price indices powered by AI," CeMMAP working papers 08/23, Institute for Fiscal Studies.
    4. Huffman, Wallace, 2006. "The Story Behind the Post-War Decline in Women's Housework: Prices, Income, Family Size, and Technology Effects in a Demand System," Staff General Research Papers Archive 12601, Iowa State University, Department of Economics.
    5. Silver, Mick & Heravi, Saeed, 2005. "A Failure in the Measurement of Inflation: Results From a Hedonic and Matched Experiment Using Scanner Data," Journal of Business & Economic Statistics, American Statistical Association, vol. 23, pages 269-281, July.
    6. Sutirtha Bandyopadhyay & Bharat Ramaswami, 2022. "The representative agent bias in cost of living indices," Bulletin of Economic Research, Wiley Blackwell, vol. 74(1), pages 155-178, January.
    7. Goldman, Dana P. & Sood, Neeraj & Leibowitz, Arleen, 2005. "The reallocation of compensation in response to health insurance premium increases," Economics Letters, Elsevier, vol. 88(2), pages 147-151, August.
    8. Fox, Kevin J. & Syed, Iqbal A., 2016. "Price discounts and the measurement of inflation," Journal of Econometrics, Elsevier, vol. 191(2), pages 398-406.
    9. Lieu, Pang-Tien & Liang, Jung-Hui & Chen, Jui-Hui, 2008. "Consumer preferences and cost of living in Taiwan," Journal of Asian Economics, Elsevier, vol. 19(3), pages 224-235, June.
    10. Christian Broda & Ephraim Leibtag & David E. Weinstein, 2009. "The Role of Prices in Measuring the Poor's Living Standards," Journal of Economic Perspectives, American Economic Association, vol. 23(2), pages 77-97, Spring.
    11. Lukas Mohler, 2014. "Variety Gains and the Extensive Margin of Trade," International Economic Journal, Taylor & Francis Journals, vol. 28(4), pages 543-558, December.
    12. Karl Whelan, 2000. "A guide to the use of chain aggregated NIPA data," Open Access publications 10197/253, School of Economics, University College Dublin.
    13. Jan van Dalen & Ben Bode, 2004. "Quality-corrected price indices: the case of the Dutch new passenger car market, 1990-1999," Applied Economics, Taylor & Francis Journals, vol. 36(11), pages 1169-1197.
    14. Sato, Misato & Singer, Gregor & Dussaux, Damien & Lovo, Stefania, 2019. "International and sectoral variation in industrial energy prices 1995–2015," Energy Economics, Elsevier, vol. 78(C), pages 235-258.
    15. Herzberg, Julika & Knetsch, Thomas A. & Schwind, Patrick & Weinand, Sebastian, 2021. "Quantifying bias and inaccuracy of upper-level aggregation in HICPs for Germany and the euro area," Discussion Papers 06/2021, Deutsche Bundesbank.
    16. R. A. Somerville, 2004. "Changes in Relative Consumer Prices and the Substitution Bias of the Laspeyres Price Index - Ireland, 1985-2001," The Economic and Social Review, Economic and Social Studies, vol. 35(1), pages 55-82.
    17. R. D. Rossiter, 2000. "Fisher Ideal Indexes in the National Income and Product Accounts," The Journal of Economic Education, Taylor & Francis Journals, vol. 31(4), pages 363-373, December.
    18. Christos Ioannidis & Mick Silver, 2003. "Chained, exact and superlative hedonic price changes: estimates from microdata," Applied Economics, Taylor & Francis Journals, vol. 35(9), pages 1005-1014.
    19. Patrick Sillard & Lionel Wilner, 2015. "Constant utility index and inter-month substitution," Economics Bulletin, AccessEcon, vol. 35(3), pages 1772-1781.
    20. Mick Silver & Saeed Heravi, 2003. "The Measurement of Quality-Adjusted Price Changes," NBER Chapters, in: Scanner Data and Price Indexes, pages 277-316, National Bureau of Economic Research, Inc.

    More about this item

    Keywords

    Teaching methods; Chain-weighting; GDP;
    All these keywords.

    JEL classification:

    • A22 - General Economics and Teaching - - Economic Education and Teaching of Economics - - - Undergraduate
    • E10 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hcx:wpaper:0206. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Victor Matheson (email available below). General contact details of provider: https://edirc.repec.org/data/deholus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.