Talk:GDP deflator

message: *It seems to me that the formula at the end of the article is inaccurate and potentially misleading.  Shouldn't the numerator be the current-price value of the base year total production?  With the deflator formula as it is, GDP growth can only be 0%.
**"Current year GDP/base year GDP" looks like the "nominal" GDP increase from the base year to the current year. - Jerryseinfeld 22:20, 17 Dec 2004 (UTC)
thread_title: Formula

message: I don't like the name "deflator", it's a price index like everybody else.--Jerryseinfeld 17:35, 1 Jan 2005 (UTC)
replies: text: @Jerryseinfeld 152.36.209.23 (talk) 17:05, 4 March 2022 (UTC)
thread_title:  Language 

message: I removed several inaccurate and POV statements.  The following statement demonstrates the basic problem
The advantage of this approach is that the GDP deflator accounts for changes in both prices and the composition of the basket - i.e. as prices and consumer preferences change, the GDP deflator accurately tracks both automatically
The GDP does not measure prices and changes in the basket automatically. GDP measurements are combined with price index measurements to produce the GDP deflator. As the article formula shows, the GDP deflator is calculated by dividing nominal GDP by real GDP. In order to calculate real GDP, there needs to be an existing measurement of price change. The GDP deflator does not measure price change "automatically."
However, this also makes the GDP deflator less than desirable from a political and policy standpoint, as it cannot be manipulated in any way to reflect subjective preferences regarding what goods are 'most important' to measure when figuring an inflation rate. The U.S. government's Consumer Price Index (CPI) can be viewed, from the government's standpoint, as more desirable in this regard, even if it is probably less accurate.
The above is POV speculation and inaccurate. The US GDP deflators (e.g. PCE price index) actually use some CPI data. As stated above, there needs to be some existing price measurement to calculate a GDP deflator)
It can also be argued that abandoning use of the hedonic price index in this way, and simply relying on the GDP deflator, would also accurately reflect this increase in value and utility, though with less complication. The GDP itself would tend to increase over the same period (via greater productivity), at some level reflecting the greater capability better computers brought to the economy, and the deflator would simply record the real price increase of computers themselves.
This is the most accurate thing I'm removing. While GDP would eventually pick up some of the benefits of increased productivity from better computers, it would still miss out on the direct benefits of consumers. It would be like saying "lets not measure cars in GDP because the benefits of transportation will be picked up in the rest of GDP."--Bkwillwm 03:35, 22 August 2007 (UTC)
thread_title:  Corrections and POV 

message: The YoY change in GDP deflator can be shown to be approximated to inflation.
This is because of Laspeyres or Paasche price index formula used to define inflation or price index on weighted scale, i.e. net consumption on a weighted scale (w).
The index methods above use both price and qty in the ratios to define indices.
The relationship stems from the base method being Laspeyres or Paasche.
Another approximation:
%deflator = 1+ %inflation from base year
That is why the change in GDP deflator becomes a measure of inflation.
Proof:
Formulas:
GVA current = GVA constant + change from base year (including changes due to taxation in base year)
P1.Q1 = P0.Q1 + (P1-P0)(Q1)
P0- base year, P1- year 1, P2 year 2
GVA current /GVA constant = change from base year/GVA constant + 1 =Deflator
Deflator = change from base year/GVA constant +1 =D +1
Derivation of Relation of Inflation and Deflator																						
Simple Paasche/Laspeyres' Index for Inflation I(n) = sum(PnQn)/sum(P0.Qn) - one can choose Q as present qty Qn or base year qty Q0 throughout
Inflation Index I1 = sum(P1(Q1))/sum(P0.Q1)
Inflation Index I2 = sum(P2(Q2))/sum(P0.Q2)
I2-I1 = 1/sum(P0.Q1).sum(P0.Q2) ( sum(P2.Q2).sum(P0.Q1) - sum(P1.Q1).sum(P0.Q2) )
(I2-I1)/I1 = 1/sum(P1.Q1)sum(P0.Q2) ( sum(P2.Q2).sum(P0.Q1) - sum(P1.Q1).sum(P0.Q2) )
D1=sum(P1Q1)/sum(P0Q1)=1 + sum((P1-P0)(Q1))/sum(P0.Q1)
D2=sum(P2Q2)/sum(P0Q2)=1 + sum((P2-P0)(Q2))/sum(P0.Q2)
(D2-D1) = sum(P2Q2).sum(P0Q1)/sum(P0Q1).sum(P0Q2) - sum(P1.Q1).sum(P0.Q2)/sum(P0.Q1).sum(P0.Q2)
(D2-D1)/D1 = (1/sum(P0.Q2).sum(P1.Q1)) ( sum(P2.Q2).sum(P0.Q1) - sum(P1.Q1).sum(P0.Q2) ) = (I2-I1)/I1
% change in deflator = % change in Inflation Index 
 — Preceding unsigned comment added by 122.166.175.207 (talk) 19:15, 10 October 2017 (UTC)
thread_title:  Relationship to inflation 

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thread_title:  External links modified