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Avoiding Anomalies of GDP in Constant Prices by Conversion to Chained Prices

Author

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  • Jesus C. Dumagan

    (PIDS)

Abstract

Changing the base year (1985) of Philippine GDP in constant prices could change the growth rate and the shares of components even when there is no change in the volume of production, implying that the changes in growth rate and shares are anomalous (i.e., no real basis). This possibility weakens GDP in constant prices as basis for valuing our economys production and analyzing its growth performance. This paper demonstrates that conversion to chained prices avoids the above anomalies and also shows smaller and shrinking agriculture and industry sectors and enlarging services sector that is now over 50 percent of the Philippine economy than are shown by valuation in constant 1985 prices. In both contributions to level and growth of GDP, chained prices accentuate more than constant 1985 prices the declining importance of agriculture and industry and the rising importance of services in Philippine economic transformation.

Suggested Citation

  • Jesus C. Dumagan, 2008. "Avoiding Anomalies of GDP in Constant Prices by Conversion to Chained Prices," Macroeconomics Working Papers 22632, East Asian Bureau of Economic Research.
  • Handle: RePEc:eab:macroe:22632
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    File URL: http://www.eaber.org/node/22632
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    References listed on IDEAS

    as
    1. Balk, Bert M., 2004. "Decompositions of Fisher indexes," Economics Letters, Elsevier, vol. 82(1), pages 107-113, January.
    2. Whelan, Karl, 2002. "A Guide to U.S. Chain Aggregated NIPA Data," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 48(2), pages 217-233, June.
    3. Domingo, Estrella V., 1992. "The Revised Philippine System of National Accounts," Philippine Journal of Development JPD 1992 Vol. XIX No. 1-b, Philippine Institute for Development Studies.
    4. Joe Robjohns, 2007. "Methods explained: Contributions to growth rates under annual chain-linking," Economic & Labour Market Review, Palgrave Macmillan;Office for National Statistics, vol. 1(6), pages 53-56, June.
    5. J. C. Dumagan & V. E. Ball, 2009. "Decomposing growth in revenues and costs into price, quantity and total factor productivity contributions," Applied Economics, Taylor & Francis Journals, vol. 41(23), pages 2943-2953.
    6. Diewert, W. E., 1976. "Exact and superlative index numbers," Journal of Econometrics, Elsevier, vol. 4(2), pages 115-145, May.
    7. Diewert, W Erwin, 1978. "Superlative Index Numbers and Consistency in Aggregation," Econometrica, Econometric Society, vol. 46(4), pages 883-900, July.
    8. Dumagan, Jesus C., 2002. "Comparing the superlative Tornqvist and Fisher ideal indexes," Economics Letters, Elsevier, vol. 76(2), pages 251-258, July.
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    Citations

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    Cited by:

    1. Jesus C. Dumagan, 2009. "Comparing GDP in constant and in chained prices : Some new results," Finance Working Papers 22953, East Asian Bureau of Economic Research.
    2. Jesus C. Dumagan, 2008. "Implementing US GDP in Chained Prices for Cross-country GDP Growth and Sectoral Comparisons : Application to Selected ASEAN Countries," Macroeconomics Working Papers 22631, East Asian Bureau of Economic Research.
    3. Michael R. Cabalfin & Josef T. Yap, 2008. "Sustainable Development Framework for Local Governance," Governance Working Papers 22619, East Asian Bureau of Economic Research.

    More about this item

    Keywords

    Real GDP; constant prices; chained prices; Fisher index;

    JEL classification:

    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation

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