GDP Price Deflator

GDP Price Deflator

A ratio of nominal GDP to real GDP expressed as a percentage. The GDP price deflator is used as a measure of the inflation rate; it does not account for price changes in commodity baskets like the Consumer Price Index. Rather, it shows changes in GDP compared with a base year.
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References in periodicals archive ?
The overall GDP price deflator, a broad measure of inflation, increased by 1.8% in the third quarter, down from 3.3% previously.
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.
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.
Why the price of imports, instead of, say, the price of exports, or the GDP price deflator? To the extent that trade is nearly balanced, the choice of the common deflator does not matter much, but our analysis based on the GDP-function model nevertheless suggests that the appropriate deflator is the price of domestic sales.
The most important feature of this sector is that the direct tax rate is determined endogenously to prevent a shock from causing a continuous rise or fall in the ratio of real government debt (nominal debt deflated by the GDP price deflator) to potential GDP.
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. Finally, interest payments are computed by multiplying the stock of government debt by the average rate of return on outstanding government securities.
Payroll taxes are assumed to vary proportionally with labor income, which is the product of the hourly wage rate and total employment.(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.
Short-term prospects 1995 1996 1997 Per cent change, annual rate Private consumption 2 1/4 2 3/4 3 Government consumption 0 0 0 Gross fixed investment 7 1/2 7 6 1/2 Total domestic demand 3 1/4 3 1/2 3 1/2 Exports of goods and services 9 3/4 9 8 3/4 Imports of goods and services 9 3/4 10 9 1/4 Foreign balance(1) -1/4 -1/2 -1/2 GDP at constant prices 3 1/4 3 3 GDP price deflator 4 1/4 3 1/2 3 Private consumption deflator 4 3/4 3 1/2 3 Memorandum items: Non-farm business sector: Unit labour costs 3 3 2 1/2 Productivity 1/2 1 1 1/4 Employment 2 1/2 1 3/4 1 3/4 Unemployment rate (per cent) (22 3/4) (22) (21 1/4) Per cent of GDP Current external balance(2) 0 -1/4 -1/2 Government net lending(3) -6 -5 -4 of which: Gross saving -2 -1 1/2 -1/2 Primary balance -1 3/4 -1/4 1/2 1.
On the assumption that profit margins will increase somewhat and that budgeted increases in indirect taxes are realised, the GDP price deflator is projected to rise by 3 3/4 per cent in 1994.
Short-term prospects OECD projections 1993 1994 1995 Per cent change, annual rate Private consumption -2.3 0.7 2.7 Government consumption 1.6 -0.2 0.5 Gross fixed investment -10.3 -2.1 5.0 Total domestic demand -3.6 0.0 2.9 Exports of goods and services 8.8 9.9 8.9 Imports of goods and services -3.2 4.5 9.1 Foreign balance(1) 2.9 1.1 -0.3 GDP at constant prices -1.0 1.2 2.7 GDP price deflator 4.5 3.8 3.3 Private consumption deflator 5.1 4.5 3.4 Memorandum items: Non-farm business sector Unit labour costs 3.8 2.0 2.0 Productivity 3.5 2.5 1.5 Employment -4.3 -1.2 0.7 Unemployment rate (per cent) (22.7) (24.5) (24.4) Per cent of GDP Current external balance(2) -0.8 -0.5 -0.8 Government net lending(3) -7.2 -7.1 -5.9 of which: Gross saving -1.9 -1.9 -0.8 Primary balance -2.4 -1.9 -0.7 1.