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The Geometric Young Formula for Elementary Aggregate Producer Price Indexes

Author

Listed:
  • Martin Robert S.

    (U.S. Bureau of Labor Statistics, 2 Massachusetts Ave., NE, Washington, DC 20212, U.S.A.)

  • Sadler Andy

    (U.S. Bureau of Labor Statistics, 2 Massachusetts Ave., NE, Washington, DC 20212, U.S.A.)

  • Stanley Sara

    (U.S. Bureau of Labor Statistics, 2 Massachusetts Ave., NE, Washington, DC 20212, U.S.A.)

  • Thompson William

    (U.S. Bureau of Labor Statistics, 2 Massachusetts Ave., NE, Washington, DC 20212, U.S.A.)

  • Weinhagen Jonathan

    (U.S. Bureau of Labor Statistics, 2 Massachusetts Ave., NE, Washington, DC 20212, U.S.A.)

Abstract

We re-estimate historical U.S. Producer Price Indexes (PPI) using the geometric Young formula at the elementary level. The geometric Young has better axiomatic properties than the modified Laspeyres, and may better approximate a feasible economic target. We find in most cases, indexes that use the geometric Young escalate between 0.1 and 0.3 percentage points less each year than those that use the modified Laspeyres. However, for wholesale and retail trade, as well as some other services, the differences are much larger. As a result, using the geometric Young at the elementary level lowers the U.S. PPI for Final Demand by 0.55 percentage points per year during the study period, a magnitude larger than what has been previously found for the U.S. Consumer Price Index.

Suggested Citation

  • Martin Robert S. & Sadler Andy & Stanley Sara & Thompson William & Weinhagen Jonathan, 2022. "The Geometric Young Formula for Elementary Aggregate Producer Price Indexes," Journal of Official Statistics, Sciendo, vol. 38(1), pages 239-253, March.
    • Handle: RePEc:vrs:offsta:v:38:y:2022:i:1:p:239-253:n:7
    DOI: 10.2478/jos-2022-0011
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    References listed on IDEAS

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    1. Caves, Douglas W & Christensen, Laurits R & Diewert, W Erwin, 1982. "The Economic Theory of Index Numbers and the Measurement of Input, Output, and Productivity," Econometrica, Econometric Society, vol. 50(6), pages 1393-1414, November.
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