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Theoretical Elements on the Use of Price Indices for Inflation Measurement

Madalina-Gabriela Anghel (), Georgeta Lixandru (), Marius Popovici (), Alina – Georgiana Solomon () and Emilia Stanciu ()

International Journal of Academic Research in Accounting, Finance and Management Sciences, 2017, vol. 7, issue 3, 38-47

Abstract: In this article, the authors aim to highlight the main theoretical elements that are required when using price indices to measure inflation. It is known that inflation is changing prices over a period of time. In common terms, inflation appears simplified as a consumer price index. Of course, the consumer price index is an index that, taking into account the price change for the three groups of goods and services (food, non-food or services), gives a size that is close to the inflation index. Inflation, however, measures the evolution of all products and services in a country. That is why we take into account the change in the prices of the national economy in ensuring a true inflation calculation. The indices calculated for price changes are important because they are used in the deflation operation that determines the actual expression of the indicators. Deflatory indices as a measure of inflation are, in fact, price indices, although they are calculated in different forms and normally have a different content. In this article, the authors study the key elements of calculating and then applying the index or inflation rate to deflating the macroeconomic outcomes indicators. On this basis, deflated indices ensure real comparability both internally and comparability by obtaining another set of indicators internationally. The elements to be considered are outlined in this article and are edifying from the point of view of how price indices reflect the magnitude of inflation.

Keywords: Value indicator; deflation; controlled prices; consumer price index; harmonized price index; inflation (search for similar items in EconPapers)
Date: 2017
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Handle: RePEc:hur:ijaraf:v:7:y:2017:i:3:p:38-47