The GDP was introduced as a monetary measure of wa- rtime production capacity during the World War II. To- day, it is widely used by policymakers, economists, and the media as the primary scorecard of a nation’s econo- mic health and welfare. However, GDP has some unav- oidable deficiencies as a measure of economic perform- ance (see [10-12]), and is incapable of measuring peo- ples’ well-being. The major problem is that GDP makes no distinction between economic transactions that add to welfare and those that diminish it . It includes all expenditures, assuming that every monetary transaction adds to peoples’ welfare. Real GDP is often used as a proxy of a country’s real income, even though official statisticians warn against such a practice . Thus, Prescott , who singles out Switzerland for its poor economic performance over the past three decades, fo- cuses exclusively on real GDP. Yet, unlike a technologi- cal progress, the beneficial effect of an improvement in the terms of trade is not captured by real GDP, which focuses on production per se. In fact, if real GDP is measured by Laspeyres quantity index, as it is still the case in most countries, an improvement in the terms of trade will actually lead to a fall in real GDP . Based on the nominal GDP(NGDP) and real GDP (RGDP), an index GDP deflator (GDPD) is defined by
author found out the target rate of CPI and WPI for India. Author observed that one per cent increase in whole sale priceindex per year leads to 0.59 per cent increase in GDP growth rate per year in India during 1960-2015. The WPI granger cause directional. Growth and WPI is cointegrated in the order of one. VEC Model is stable but change in WPI has slow error correction whereas change in ection process is faster than change in WPI. Its residuals are not normal having autocorrelation problem and impulse response functions are diverging. During 1995 and 2008 respectively. Above the growth nexus tends to negative. The paper also found that one per cent increase in consumerpriceindex per year leads to 0.55 per cent increase e CPI granger cause growth rate but not directional. Growth and CPI is cointegrated in the order of one. VEC Model is stable and is highly good fit but only error correction process of change in growth rate is or speedy correction. Its residuals are not normal having autocorrelation problem and CPI has four structural breaks at 1974, and 2008 respectively. Above the threshold level of CPI=3.258 with 2010=100, the
This work is an extension of earlier work to detail and quantify the differences between the CPI and the PCE priceindex. In 1978, BEA decomposed changes in the CPI and the PCE implicit price deflator for the time period, 1970-1977. 2 Over that period, the CPI increased 0.5 percentage point per year more than the PCE deflator. Over half of the difference was determined to be the weight effect. The scope effect explained roughly 40 percent of the difference. Differences in the methodologies used by the BLS and the BEA to estimate price changes for owners’ equivalent rent were an important part of the scope effect; these differences were partly offset by other scope differences. 3 The formula effect and “other effects” were small and offsetting. 4
To investigate the pass-through of exchange rates to import price and domestic price inflation under different currency substitution levels, monthly data from January 1998 to December 2013 were gathered. The endogenous variables of the model are the output gap, the exchange rate, import prices and price inflation. The first variable used in the specification is the domestic output gap ( Y − Y ), estimated from real GDP using the Hodrick-Prescott filter 5 . It controls for the effects of excess demand on inflation. The exchange rate is domestic currency value of one U.S. dollar. Import prices are given by the import unit value index, denominated in Turkish Lira (TL). Price inflation is given by the consumerpriceindex (CPI).