View Full Version : How to measure Inflation over years?

October 21st, 2010, 05:55 PM
I was wondering how to measure well inflation over years?

has it to be a measure of the price of gold, or simple bread value to check how it evolves

October 21st, 2010, 06:16 PM
A cross section of core consumer products. Definitely not gold that is a speculative item.

October 21st, 2010, 07:28 PM

October 21st, 2010, 07:57 PM
There are measures based on a "basket of goods" like the American Consumer Price Index and Wholesale Price Index. The basket is supposed to be composed of items in proportion to their presence in an average consumer's purchasing schedule. Since these proportions change as time passes, the composition of the basket becomes a political question as much as an economic one.

A better measure is the "implicit GDP deflator" measured by comparing estimates of "real" Gross Domestic Product and its monetary value. Here's a graph from the World Bank's site for the US. You can choose other countries as well.


Consumer prices (US):

The behavior of these indexes after about 2000 is interesting. The GDP deflator increased sharply in 2004 and has fallen ever since. The CPI remained pretty stable throughout this period then actually fell below zero ("deflation") with the recession in 2009.


The Economist (http://www.economist.com/markets/bigmac/) uses the price of a McDonalds' Big Mac to estimate what's called "purchasing power parity" across countries. Those Chinese (http://www.economist.com/node/17257797) with their yuan manipulations pay just the equivalent of $2.18 for a Big Mac that costs an average of $3.71 in the US!

October 22nd, 2010, 07:11 AM
Ubuntu is the greatest forum ever. Many thanks !!

October 22nd, 2010, 08:02 AM
A basket of long lived consumer goods is best.

If you just want a single point, then the price of a can of Coca Cola at a street vending machine is a very good measure, since it includes coffee, sugar and aluminum.

October 22nd, 2010, 08:14 AM
I think I've officially seen it all on UF.org....


October 22nd, 2010, 07:40 PM
wikipedia has answer for everything.