Title

Decomposing the Changes of the Divisia Price Index: Application to Inflation in the Phillipines

Publication Type

Journal Article

Publication Date

2013

Abstract

We decompose the logarithmic change in the Divisia price index into the pure price, substitution, and preference effects, although the latter two effects are hard to distinguish in practice. This decomposition allows us to identify the incidence and contributing factors of inflation. In the Philippines, we find that the preference effect is much smaller than the pure price effect in all provinces. We also find that rich deciles have experienced a higher inflation than poor deciles between 1988 and 2006. However, the gap in the standards of living has actually widened because poor deciles lagged behind in consumption growth.

Keywords

Divisia price index, preference change, decomposition, Philippines

Discipline

Asian Studies | Macroeconomics

Research Areas

Macroeconomics

Publication

Economics Bulletin

Volume

33

Issue

1

First Page

545

Last Page

556

ISSN

1545-2921

Publisher

Economics Bulletin

Comments

http://ink.library.smu.edu.sg/cgi/viewcontent.cgi?article=2262&context=soe_research

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