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

SMU Economics & Statistics Working Paper No. 06-2011

13 Pages Posted: 13 Apr 2011

See all articles by Tomoki Fujii

Tomoki Fujii

Singapore Management University - School of Economics

Date Written: March 11, 2011

Abstract

We propose a method to decompose the logarithmic change of the Divisia price index into the pure price effect, the preference effect and the substitution effect. Our empirical results in the Philippines shows the effects of preference change on the Divisia price index are heterogeneous but positive across all regions and income deciles. However, they are dominated by the pure price effect.

Keywords: Divisia price index, preference change, decomposition, Philippines

JEL Classification: E31, I32, O10

Suggested Citation

Fujii, Tomoki, Decomposing the Changes of the Divisia Price Index: Application to Inflation in the Philippines (March 11, 2011). SMU Economics & Statistics Working Paper No. 06-2011. Available at SSRN: https://ssrn.com/abstract=1806989 or http://dx.doi.org/10.2139/ssrn.1806989

Tomoki Fujii (Contact Author)

Singapore Management University - School of Economics ( email )

90 Stamford Road
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Singapore
+6568280279 (Phone)
+6568280833 (Fax)

HOME PAGE: http://www.mysmu.edu/faculty/tfujii/

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