Producer Price Index Manual: Theory and Practice ... - METAC

Producer Price Index Manual
whether or not to price update the weights from b to
0. In practice, the price-updated weights can be calculated
by multiplying the original weights for period
b by elementary indices measuring the price
changes between periods b and 0 and rescaling to
sum to unity.
9.98 The issues involved are best explained with
the help of a numerical example. In Table 9.7, the
base period b is assumed to be the year 2000 so that
the weights are the revenue shares in 2000. In the
upper half of the table, 2000 is also used as the
price reference period. However, in practice,
weights based on 2000 cannot be introduced until
after 2000 because of the time needed to collect and
process the revenue data. In the lower half of the
table, it is assumed that the 2000 weights are introduced
in December 2002, and that this is also chosen
as the new price reference base.
9.99 Notice that it would be possible in December
2002 to calculate the indices based on 2000
shown in the upper half of the table, but it is de-
Table 9.7. Price Updating of Weights Between Weight and Price Reference Periods
Index Weight 2000 Nov-02 Dec-02 Jan-03 Feb-03 Mar-03
Index with 2000 as weight and price reference period
Elementary price indices
w 00
A 0.20 100.00 98.00 99.00 102.00 101.00 104.00
B 0.25 100.00 106.00 108.00 107.00 109.00 110.00
C 0.15 100.00 104.00 106.00 98.00 100.00 97.00
D 0.10 100.00 101.00 104.00 108.00 112.00 114.00
E 0.30 100.00 102.00 103.00 106.00 105.00 106.00
Higher-level indices
G = A+B+C 0.60 100.00 102.83 104.50 103.08 104.08 104.75
H = D+E 0.40 100.00 101.75 103.25 106.50 106.75 108.00
Total 100.00 102.40 104.00 104.45 105.15 106.05
Index re-referenced to December 2002 and weights price-updated to December 2002
Elementary price indices
w 00(Dec02)
A 0.190 101.01 98.99 100.00 103.03 102.02 105.05
B 0.260 92.59 98.15 100.00 99.07 100.93 101.85
C 0.153 94.34 98.11 100.00 92.45 94.34 91.51
D 0.100 96.15 97.12 100.00 103.85 107.69 109.62
E 0.297 97.09 99.03 100.00 102.91 101.94 102.91
Higher-level indices
G = A+B+C 0.603 95.69 98.41 100.00 98.64 99.60 100.24
H = D+E 0.397 96.85 98.55 100.00 103.15 103.39 104.60
Total 96.15 98.46 100.00 100.43 101.11 101.97
Rescaled to 2000 = 100 100.00 102.40 104.00 104.45 105.15 106.05
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