What is the Constant Price Series (KP)?

Constant price or "real" series, also known as constant price estimates or "real" estimates, are economic data that have been adjusted for the effects of inflation. 

These estimates are produced by deflating the nominal data, which reflects current prices, by a price index such as the consumer price index (CPI). The resulting data series is expressed in "real" or "constant" prices, which means that the data is shown in terms of the prices that prevailed in a particular base period.

The main purpose of creating constant price series is to facilitate comparison of economic data over time, by eliminating the distorting effect of inflation on the data. Without adjusting for inflation, it can be difficult to determine whether changes in the data reflect genuine changes in economic activity or simply reflect changes in the general level of prices.

For example, consider the case of GDP. If we just compare the nominal GDP of two different years, it may appear that the economy has grown significantly, even if the actual volume of economic activity has not changed. This is because the nominal GDP figures will be higher in the later year due to the general increase in prices that has occurred over time. By adjusting the GDP figures for inflation, we can get a better idea of the "real" GDP and whether the economy has actually grown or not.

Constant price series can be created for a wide range of economic data, including GDP, national accounts, retail sales, industrial production, and employment. In each case, the data is deflated by a suitable price index in order to remove the effects of inflation.

There are several methods that can be used to create constant price series, depending on the type of data being adjusted and the purpose of the adjustment. One common method is the "Laspeyres" method, which uses a fixed basket of goods and services as a reference point. The Laspeyres method is often used to create constant price estimates of national accounts data, such as GDP and personal income.

Another method is the "Paasche" method, which uses a moving basket of goods and services. The Paasche method is often used to create constant price estimates of index numbers, such as the producer price index (PPI) or the consumer price index (CPI).

Regardless of the method used, the goal of creating constant price series is to provide a more accurate and meaningful comparison of economic data over time, by eliminating the distorting effect of inflation. Constant price series are used by economists, policy makers, and other analysts to better understand the underlying trends in the economy and to make more informed decisions about economic policy.

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