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Analysis of the Main Aspects Regarding the Price Indices Applied in the Determination of Inflation

Madalina-Gabriela Anghel (), Maria Mirea () and Alexandru Badiu ()

International Journal of Academic Research in Accounting, Finance and Management Sciences, 2018, vol. 8, issue 2, 28-36

Abstract: Inflation is the abridged or statistically synthesized form of price rises. Inflation can be expressed in the terms we commonly encounter in analyzes and daily studies as the consumer price index, which is nothing more than the evolution of the prices of the goods bought and of the tariffs and services used. It is, to put it this way, the main index or instrument for assessing inflation. However, a number of other indicators that are specific to the economic activity domains are used in the calculation of the consumer price index. Thus, we find the index of industrial production prices, the unit value of exports and imports, the cost of living index, the retail price index, the construction cost index, the agrifood product price index, or the average exchange rate index. All of these indicators that we have mentioned are used in inflation calculations in the sense that they are being discussed when it comes to determining how inflation is evolving. Inflation is an indicator that has negative effects on the real outcomes of economic activity and negatively influences the real value of the incomes of the population at one time. In calculating inflation, a number of issues have to be resolved, such as the definition of the calculated indicators, the advantages and disadvantages of the harmonization of the indicators mentioned the scope of each of them, the data sources and especially the most commonly encountered problem, the weighting system which we use. We know that there is an integrated household survey, family budget surveys, so that the data obtained can be processed so that they can present in a realistic way the evolution of prices within the national economy. Inflation is also important because once we know the concrete results; we can bring macroeconomic performance indicators as well as other sizes at a real comparability level. It is known that in the evolution of each period of time the macroeconomic indicators are calculated in the prices of the respective period, and then by deflation we manage to bring the indicators to a level of comparability. In the study, the emphasis is on solving these issues, so that specific inflation indices, such as the monthly inflation rate, the monthly average inflation rate, the inflation rate at the end of the period or year or the annual inflation rate, will be harmonize, correlate and put in place the possibility of making a realistic inflation calculation in the national economy. The Laspeyres or Paasche type weighting issue involves two issues that need to be considered when we build indicators that measure inflation.

Keywords: Price Index; Inflation; Harmonized Inflation Index; Tariff; Deflation; Comparability (search for similar items in EconPapers)
Date: 2018
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Handle: RePEc:hur:ijaraf:v:8:y:2018:i:2:p:28-36