Selecting The Way Of Measuring The Price Evolution Using The Method Of Indices

The price indices have a long history and a large variety of uses, from the adjustment of the wages, pensions and payments included in a long-term contract, the deflation of aggregates in National Accounts, to the elaboration of economic policies. Having identified the purpose of the index, we`ll have to choose the target index and the calculation formula, this operation being carried out based on the observed prices and on the quantity and quality weights. In the statistical practice, the price index is often calculated by aggregating the elementary indices using the weighted arithmetic mean, using annual weights from a period that is previous to the reference period. In this situation, the question about the possible impact of the weights update (by prices) on the interpretation of price indices becomes legitimate, also the question about the influence of using this approach on measuring the price change. We can get a possible answer to this question using the Lowe and Young indices introduced by the Consumer Price Index international manual.