Corrado, Carol, Peter Goodridge, and Jonathan Haskel (2013) "Constructing a Price Deflator
for R&D: Calculating the Price of Knowledge Investments as a Residual," paper presented at the UNSW Productivity Workshop, November 28-29 Sydney, Australia.
His VAR model includes two lags of value added in the private sector, the corresponding deflator
, man hours, the consumption-output ratio, and alternative measures of monetary variables or the share of labor compensation in the value added of the corporate business sector.
As for the effect of different deflators
concerns, Table 4 provides some estimation results about the price effect caused by using a different GDP deflator
Our point estimates of [theta] are higher in the second sample period, implausibly so for the NFB deflator
Note that this argument would not work if the state-price deflator
were not always positive.
Overall, the above deflation procedures mean that the implicit health-sector price index presented in Table 3 is an average of (1) a GST-adjusted hospital care prices index weighted by expenditures on institutional services, (2) a GST-adjusted physician incomes index weighted by expenditures on community medical expenditures plus expenditures on teaching and research, (3) a GST-adjusted dentist incomes index weighted by expenditures on dental services, (4) a GST-adjusted drugs and health services index weighted by expenditures on drugs and prostheses, and (5) the implicit GDP deflator
index weighted by expenditures on public health.
used in defining the demand for real money balances is given by the index
During the 1970's, many analysts suggested that the CPI was overstating the inflation rate when compared to the PCE Deflator
The Choice of Consumption Deflator
: CPI or Personal Consumption Expenditures Deflator
Finally, as one can tell by comparing the two series shown in chart 4, the choice of an appropriate earnings deflator
is an important one for a real purchasing power series--especially for assessing trends during periods of rapid inflation such as the 1970's.
The greatest difference between industry-specific and aggregate deflators
shows up in industries where labor and other input costs have a different growth rate from the single index chosen.
As was noted in Summary Table 15, one-third of the difference in the growth rate between median real earnings and labour productivity over the period from 1980 to 2005 can be explained by differences in the growth rates between the GDP deflator
and the Consumer Price Index.