Lecture 3 Data and Indicators Flashcards
What means SNA?
Set of recommondations on how to compile measures of economic activity in accordance with established accounting conventions based on economic principles
Characteristics and why do we need SNA?
Internationally compatible, Harmonized with those in other social and economics statistics, well established and fixed for long period.
Flexible and multipurpose, focused on describing the economic process in monetary and readible observable terms.
General questions about economic activity by politicans, central bankers and economists. How is the economy running? What was produced, how many workers/hours worked….
National Income Accounting?
Accounting framework used in measuring current economic activity. Three alternative approachs: Product, Income and Expenditure approach.
Flow and Stock concept?
GDP is a flow concept, e.g. people would be stock. Stock: amount at a particular moment in time (people, store of wealth. Stock equivalent to national income accounts is the national balance sheet.
Problem of measuring GDP?
misses nonmarket items (environment quality..) and underground economy (but there is adjustment)
Real GDP Facts
Problem: Do changes in nominal values reflect changes in prices or quantities?
Real variables: Adjust for price changes, reflect only quantify changes.
Real GDP is usually higher than nominal -> Reason: Inflation. GDP doesnt measure welfare or happiness, doesnt measure all econ activity.
Remember, Price Indices are always compared to the base year.
What are CPI, Index Numbers, simple index numbers and composite index numbers?
CPI: Monthly index of consumer prices based on a basket in one period.
Index numbers: statistical value that measures the change in a variable w.r.t. time
Simple index numbers: price relative*100 = Pn/P0 *100
Comp. Ind Num.:Disadvantages: Item with relatively large price can dominate the index. If prices are quoted for different quantities, the simple agg. index will yield a different answer. It doesnt take into accont the quanitity of each item sold.
Tell Facts about Laspeyres!
We have to use some weights (compared to index numbers).
Laspeyres pnq0/p0q0 *100 weights used are the quantities of each item bought in the base period. Laspeyres usually larger than Paasche (overestimate the rise in the cost of living
Tell Facts about Paasche!
pnqn/poqn *100 more information about the real basket. Uses the consumption in the current period, measures the change in cost of purchasing items in terms of quantities relating to the current period. May underestimate the cost of living. Paasche index uses every year a new set of weights. Laspeyres commonly used.
GDP Deflator vs CPI
GDP D produced domestically and compares some goods.
CPI bought by consumers and compares the basket. Can change…
CPI seems to be very equal, except at the oil price shocks, because GDP D only looks at goods which are produced within a country. If Import Price rise, CPI will rise, but not so clear what will happen with Y
Real vs nominal interest rates?
r = i - pi r = i -pi^expected, if pi = exp pi --> real interest rate = expected real interest rate. Interest rates should be stationary, so no clear trend.
