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Notes on GEKS and RGEKS indices

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  • von der Lippe, Peter

Abstract

The paper criticizes the translation of the so called GEKS (Gini - Eltetö - Köves - Szulc) method to make consistent (transitive, or "drift free") international comparisons of price indices (parities), into the intertemporal framework. It shows that transitivity appears to be "over-ambitious" and too restrictive in this context, where chain indices possibly may suffice. Formulas of GEKS indices are complicated geometric averages of many (2m-3) direct Fisher indices relating to m periods in time. They are therefore much more difficult to compile in praxis than both, chained and direct Fisher indices. They are only transitive for a given m, but as we are free to choose different m's there is no unique, "drift free" index to compare any two periods, s and t. Instead there are many indices Pst depending on m. Moreover with new periods, t+1, t+2, … the method requires an updating (as m increases) and a re-computing of all previously compiled indices Pst. With chain indices the update is much easier and there is no need for a re-computing. To avoid such problems a "rolling" variant (RGEKS), a kind of moving average methodology, has been proposed. With RGEKS (of which chain indices are the limiting case of m = 2), however, desirable properties of (standard) GEKS, such as transitivity and proportionality get lost, and with a cyclical movement in the prices we can well generate a trend in the indices which is absent in the underlying price data.

Suggested Citation

  • von der Lippe, Peter, 2012. "Notes on GEKS and RGEKS indices," MPRA Paper 42730, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:42730
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    File URL: https://mpra.ub.uni-muenchen.de/42730/1/MPRA_paper_42730.pdf
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    References listed on IDEAS

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    1. Ivancic, Lorraine & Erwin Diewert, W. & Fox, Kevin J., 2011. "Scanner data, time aggregation and the construction of price indexes," Journal of Econometrics, Elsevier, vol. 161(1), pages 24-35, March.
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    Cited by:

    1. Marie Leclair & Isabelle Léonard & Guillaume Rateau & Patrick Sillard & Gaëtan Varlet & Pierre Vernédal, 2019. "Scanner Data: Advances in Methodology and New Challenges for Computing Consumer Price," Economie et Statistique / Economics and Statistics, Institut National de la Statistique et des Etudes Economiques (INSEE), issue 509, pages 13-29.

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    More about this item

    Keywords

    international comparison of price indices; intertemporal comparison; transitive price indices; chain indices; chain drift;
    All these keywords.

    JEL classification:

    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
    • C82 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Macroeconomic Data; Data Access
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • B41 - Schools of Economic Thought and Methodology - - Economic Methodology - - - Economic Methodology

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