2
$\begingroup$

Some variables in economics like GDP are computed in chain-linked prices or constant prices.

What are advantages of chain-linked prices vs constant prices?

Thank you

$\endgroup$
3
  • $\begingroup$ A constant price CPI exists? Where? $\endgroup$ Apr 18, 2020 at 11:16
  • 1
    $\begingroup$ Ok. Maybe I made a mistake about constant CPI. What are advantages of chain-linked prices vs constant prices for economic variables like GDP? Thanks! $\endgroup$
    – user72728
    Apr 19, 2020 at 4:07
  • $\begingroup$ I adjusted the question to just list GDP to avoid issues. I think the answer is to find a methodology description of chain linking, as it would probably explain. My understanding is that the advantage of chain linking is that you are constantly updating the deflator to match current conditions, while constant prices face big jumps as the year moves away from the base year. If nobody answers soon, I will try to find a reference. $\endgroup$ Apr 19, 2020 at 19:27

1 Answer 1

1
$\begingroup$

The advantage of chain linking is that component weightings drift away from their weight in nominal GDP as the reference period recedes.

This is a St. Louis Fed document on the methodology: link to website.

I am not familiar enough with the details to summarise it better than that document.

$\endgroup$

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service and acknowledge you have read our privacy policy.

Not the answer you're looking for? Browse other questions tagged or ask your own question.