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Teaching Chain-Weight Real GDP Measures

Author

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  • Miles Cahill

    (Department of Economics, College of the Holy Cross)

Abstract

In 1996, the Bureau of Economic Analysis (BEA) changed the method used to calculate measures of real GDP from a Laspeyres or Paasche index to a Fisher ideal index, also called a chain-weight index. Even though this is a significant change in approach and has resulted in extensive revisions of reported statistics, many intermediate-level textbooks treat this topic casually, if at all. This article presents two applications in which this topic can be explored more thoroughly, with the help of spreadsheet software. One exercise introduces the concept of the chain-weight index by comparing it to Laspeyres, Paasche and ideal indexes with the use of utility analysis. The second exercise is a step-by-step process to calculate chain-weight index statistics.

Suggested Citation

  • Miles Cahill, 2002. "Teaching Chain-Weight Real GDP Measures," Working Papers 0206, College of the Holy Cross, Department of Economics.
    • Handle: RePEc:hcx:wpaper:0206
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    References listed on IDEAS

    as
    1. R. D. Rossiter, 2000. "Fisher Ideal Indexes in the National Income and Product Accounts," The Journal of Economic Education, Taylor & Francis Journals, vol. 31(4), pages 363-373, December.
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    3. Miles Cahill & George Kosicki, 2000. "Exploring Economic Models Using Excel," Southern Economic Journal, John Wiley & Sons, vol. 66(3), pages 770-792, January.
    4. Diewert, W. E., 1976. "Exact and superlative index numbers," Journal of Econometrics, Elsevier, vol. 4(2), pages 115-145, May.
    5. Michael J. Boskin, 1998. "Consumer Prices, the Consumer Price Index, and the Cost of Living," Journal of Economic Perspectives, American Economic Association, vol. 12(1), pages 3-26, Winter.
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    More about this item

    Keywords

    Teaching methods; Chain-weighting; GDP;
    All these keywords.

    JEL classification:

    • A22 - General Economics and Teaching - - Economic Education and Teaching of Economics - - - Undergraduate
    • E10 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - General

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