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| Tomoki Fujii |
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| ''Decomposing the changes of the Divisia price index: application to inflation in the Philippines'' |
| ( 2013, Vol. 33 No.1 ) |
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| We decompose the logarithmic change in the Divisia price index into
the pure price, substitution, and preference effects, although the
latter two effects are hard to distinguish in practice. This
decomposition allows us to identify the incidence and contributing
factors of inflation. In the Philippines, we find that the
preference effect is much smaller than the pure price effect in all
provinces. We also find that rich deciles have experienced a higher
inflation than poor deciles between 1988 and 2006. However, the gap
in the standards of living has actually widened because poor deciles
lagged behind in consumption growth. |
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| Keywords: Divisia price index, preference change, decomposition, Philippines |
JEL: I3 - Welfare and Poverty: General
O1 - Economic Development: General |
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| Manuscript Received : Nov 26 2012 | | Manuscript Accepted : Mar 04 2013 |
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