Decomposing the Changes of the Divisia Price Index: Application to Inflation in the Philippines
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.
|Date of creation:||Mar 2011|
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|Publication status:||Published in SMU Economics and Statistics Working Paper Series|
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