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In
economics Economics () is the social science that studies the production, distribution, and consumption of goods and services. Economics focuses on the behaviour and interactions of economic agents and how economies work. Microeconomics analyzes ...
, the GDP deflator (implicit price deflator) is a measure of the money price of all new, domestically produced, final goods and services in an economy in a year relative to the real value of them. It can be used as a measure of the value of money. GDP stands for
gross domestic product Gross domestic product (GDP) is a monetary measure of the market value of all the final goods and services produced and sold (not resold) in a specific time period by countries. Due to its complex and subjective nature this measure is oft ...
, the total monetary value of all final goods and services produced within the territory of a country over a particular period of time (quarterly or annually). Like the consumer price index (CPI), the GDP deflator is a measure of price inflation/deflation with respect to a specific base year; the GDP deflator of the base year itself is equal to 100. Unlike the CPI, the GDP deflator is not based on a fixed
basket A basket is a container that is traditionally constructed from stiff fibers and can be made from a range of materials, including wood splints, runners, and cane. While most baskets are made from plant materials, other materials such as horsehai ...
of goods and services; the "basket" for the GDP deflator is allowed to change from year to year with people's consumption and investment patterns.


Calculation


Measurement in national accounts

In most systems of
national accounts National accounts or national account systems (NAS) are the implementation of complete and consistent accounting techniques for measuring the economic activity of a nation. These include detailed underlying measures that rely on double-entry ...
the GDP deflator measures the ratio of nominal (or current-price) GDP to the real (or chain volume) measure of GDP. The formula used to calculate the deflator is: : \operatorname = \frac\times 100 The
nominal GDP Gross domestic product (GDP) is a money, monetary Measurement in economics, measure of the market value of all the final goods and services produced and sold (not resold) in a specific time period by countries. Due to its complex and subjec ...
of a given year is computed using that year's prices, while the
real GDP Real gross domestic product (real GDP) is a macroeconomic measure of the value of economic output adjusted for price changes (i.e. inflation or deflation). This adjustment transforms the money-value measure, nominal GDP, into an index for quantit ...
of that year is computed using the base year's prices. The formula implies that dividing the nominal GDP by the real GDP and multiplying it by 100 will give the
GDP Deflator In economics, the GDP deflator (implicit price deflator) is a measure of the money price of all new, domestically produced, final goods and services in an economy in a year relative to the real value of them. It can be used as a measure of the va ...
, hence "deflating" the nominal GDP into a real measure. It is often useful to consider implicit price deflators for certain subcategories of GDP, such as computer hardware. In this case, it is useful to think of the price deflator as the ratio of the current-year price of a good to its price in some base year. The price in the base year is normalized to 100. For example, for computer hardware, we could define a "unit" to be a computer with a specific level of processing power, memory, hard drive space and so on. A price deflator of 200 means that the current-year price of this computing power is twice its base-year price - price inflation. A price deflator of 50 means that the current-year price is half the base year price - price deflation. This can lead to a situation where official statistics reflect a drop in real prices, even though they nominally have stayed the same. Unlike some price indices (like the CPI), the GDP deflator is not based on a fixed
basket A basket is a container that is traditionally constructed from stiff fibers and can be made from a range of materials, including wood splints, runners, and cane. While most baskets are made from plant materials, other materials such as horsehai ...
of goods and services. The basket is allowed to change with people's consumption and investment patterns. Specifically, for the GDP deflator, the "basket" in each year is the set of all goods that were produced domestically, weighted by the market value of the total consumption of each good. Therefore, new expenditure patterns are allowed to show up in the deflator as people respond to changing prices. The theory behind this approach is that the GDP deflator reflects up to date expenditure patterns. For instance, if the price of chicken increases relative to the price of beef, people may spend more money on beef as a substitute for chicken. In practice, the difference between the deflator and a price index like the Consumer price index (CPI) is often relatively small. On the other hand, with governments in developed countries increasingly utilizing price indexes for everything from fiscal and monetary planning to payments to social program recipients, even small differences between inflation measures can shift budget revenues and expenses by millions or billions of dollars.


Pakistan

The
State Bank of Pakistan The State Bank of Pakistan (SBP) ( ur, ) is the Central Bank of Pakistan. Its Constitution, as originally laid down in the State Bank of Pakistan Order 1948, remained basically unchanged until 1 January 1974, when the bank was Nationalized and ...
reports the GDP deflator and the real GDP.


India

The GDP deflator is reported by the
Ministry of Statistics and Programme Implementation The Ministry of Statistics and Programme Implementation (MoSPI) is a ministry of Government of India concerned with coverage and quality aspects of statistics released. The surveys conducted by the Ministry are based on scientific sampling metho ...
. It is calculated quarterly and released annually only.


United States

The GDP and GDP deflator are calculated by the U.S. Bureau of Economic Analysis.


United Kingdom

The GDP and GDP deflator series are published by the
Office for National Statistics The Office for National Statistics (ONS; cy, Swyddfa Ystadegau Gwladol) is the executive office of the UK Statistics Authority, a non-ministerial department which reports directly to the UK Parliament. Overview The ONS is responsible for t ...
.


Canada

The GDP and GDP deflator series are published by Statistics Canada.


Australia

The GDP and GDP deflator are calculated by the Australian Bureau of Statistics.


Argentina

The GDP and GDP deflator are calculated by the
INDEC The National Institute of Statistics and Censuses ( es, link=no, Instituto Nacional de Estadística y Censos; INDEC) is an Argentine decentralized public body that operates within the Ministry of Economy, which exercises the direction of all of ...
.


Japan

The GDP and GDP deflator are calculated by the Cabinet Office.


Hong Kong

The GDP and GDP deflator series are published by the
Census and Statistics Department The Census and Statistics Department (C&SD; ) is the provider of major social and economic official statistics in Hong Kong. It is also responsible for conducting Population Census and By-census in Hong Kong since 1971. Its head office is ...
.


Nepal

The GDP and GDP deflator series are published by the Central Bureau of Statistics.


See also

* Fisher index * Etienne Laspeyres * Hermann Paasche *
Chained volume series A chained volume series is a series of economic data (such as GDP, GNP or similar kinds of data) from successive years, put in real (or constant, i.e. inflation- and deflation-adjusted) terms by computing the production volume for each year in the ...
(of GDP data.) * Implicit Price Deflator for Personal Consumption Expenditures (IPD for PCE) *
Inflation In economics, inflation is an increase in the general price level of goods and services in an economy. When the general price level rises, each unit of currency buys fewer goods and services; consequently, inflation corresponds to a reduct ...
*
GDP Gross domestic product (GDP) is a monetary measure of the market value of all the final goods and services produced and sold (not resold) in a specific time period by countries. Due to its complex and subjective nature this measure is ofte ...


References


External links


Gross Domestic Product (GDP) deflators: user guide


Data


OECD GDP deflator dataIMF database of country GDP deflators for 1980-2013
**Compare wit

{{DEFAULTSORT:Gdp Deflator Price indices Gross domestic product