But an upward revision in the GDP price deflator
, a measure of inflation, later fueled expectations for accelerated interest rate hikes, encouraging some players to buy back the dollar.
A drop in the price of imports, for instance, will, other things equal, lead to an increase in the GDP price deflator.
This kind of effect is typically buried in the GDP price deflator, but, even though it will generally be small, it is a real effect that needs to be identified and considered separately.
This divergence is precisely due to the improving terms of trade, since, as we have seen earlier, a drop in the relative price of imports tends to raise the implicit GDP price deflator, but, being excluded from its calculation, it has no such effect on the GNE deflator.
In contrast, real transfers to households are assumed to be a cyclical, depending only on potential GDP; nominal transfers are obtained using the GDP price deflator.
15) The fuel tax rate is specified on a per-barrel basis, and the value of the tax per barrel is indexed to the GDP price deflator but not to the current price of fuel.