Computation of Chained Indices (With Applications to Some Indices)
Author: Erniel B. Barrios
While actual economic statistics are the focal tool in economic management and analysis, the lag time between data collection and dissemination of data may call for the use of indices as temporary bridge on the time lag. Economic growth can be measured using different types of index numbers that can provide an alternative instrument where growth can be measured from. The cost of living index measures the ability of the consumers to spend for decent living condition. It has the ability to influence the demand, supply, as well as competition in the market. On the other hand, price indices measure the importance of the commodities of group of commodities in the consumer market. Inflation is one intermediate indicator derived from price indices which plays an important role in determining economic growth. Volume indices estimate the production movement at constant prices. They are more reflective of the production structure and efficiency. This paper introduces a chain index approach in measuring gross domestic product (GDP), and how it can be applied in the Philippine setting. Indices such as a) consumer price index/wholesale price index; b) foreign trade index; c) gross value added/gross domestic product/personal consumption; and d) producers price index: agriculture were all considered. The concept of chained indices, however, was used only on very approximate data as intermediate data on national accounts were not available.