THE MEANING OF PRICE INDEXES: A MODERN APPROACH

Janes Ângelo de Souza ()
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Janes Ângelo de Souza: ICSC – ONU

Revista de Economia Mackenzie (REM), 2004, vol. 2, issue 2, 143-168

Abstract: Since the 1960s, when the “indexation of financial operations†was implemented in Brazil, a hot item of discussion has been the most appropriated index that should be used for monetary correction of values, in a highly inflationary economy overtime. In 2004,this topic is still being discussed, even after the considerable decline of Brazil’s inflation rate and the partial removal of indexation.The current availability of multiple price indicators, based on different methodologies and showing a widearray of results,has generated doubts about Brazil’s true inflation rate. This paper provides a historical perspective on how price indicators evolved around the globe and in Brazil.This paper also elaborates on their evolution; on the creation of new indicators and onthe elimination of indexes that became obsolete overtime. This paper also defines the meaning of several indexes calculated in Brazil, by several organizations, and offers a comparative analysis of their evolution over time. Special heed is paid to the universal definition of Consumer Prices Indexes as an overall inflation indicator.This paper also highlights the improper use ofindexes for some specific uses, such as the use of the IGP-M for the indexation of rents and charges of public services. Finally, the author presents a proposal that offers a set of indexes that would best apply in a modern economy.

Keywords: Inflation; Price indexes; Indexation; Costs revaluation; Rents; Fares; Purchasing Power; IPCA; IPA; IGP-M. (search for similar items in EconPapers)
Date: 2004
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